Other Available Items to Increase your Expenses Credit in India

Most borrowers in the country think that home loans are the only loans that can be borrowed. But in fact there are more loans like that are secured that do not include owning a home or a large sum of money. In this article we will look at some of the more underserved loans in India. This will include items used to unlock loans in India.

1. Loans for Gold

In Indian culture there has always been an importance of having gold. It symbolizes ones wealth and prosperity. But in terms of loans gold is an asset that can be used as collateral. It is simple to get credit and loan against gold is an option to consider. Increasing in prominence in today’s India as more people are turning to gold for loans. If there is the possession of gold in the form of bars or jewelry one can obtain a loan.

Pros of Loans against Gold

In comparison to other secured loans gold loans are processed faster.

• Lower Interest Rates: Because gold is a form of collateral for the lender, the interest rates will be lower compared to the interest rates associated with unsecured loans.
• Minimal Documentation: There are less paperwork involved in getting a loan against gold collateral, meaning an increased number of borrowers have an opportunity to secure these loans.

On the other hand, the most significant risk is that the lender is legally entitled to auction your gold in order to recoup his losses if you default on the loan.

2. Loan Against Securities

When we think of loans, we typically think of debt. Initially, Stocks, bonds, and other financial instruments are viewed as a positive form of debt. Did you know that these positive debts could aid you in securing negative debt, in the form of a loan? There are ways to leverage the positive debt of your securities to obtain a loan, without having to sell your investment.

Benefits of Loans Against Securities

• Ability to Maintain Investment Portfolio: There is no need to sell your securities to obtain cash. For the entire duration of the loan, you are able to retain your securities and the securities are held as collateral on the loan.
• Adaptable Payment Schedule: Loans against securities tend to come with very adaptable payment schedules. This, in turn, makes loans against securities a very good option to long-term investors.
• Rate of Interest is a Function of the Quality of Securities: The rate of interest on loans against securities is a function of the type of securities you have and is a direct function of the quality of the securities you have. The more stable and high quality, the lower the interest.

The value of certain securities may change. When the value of your securities drops significantly, the lender may ask for other collateral or for a repayment on the loan to offset the drop in value of the securities.

3. Loan Against Fixed Deposits (FDs)

FDs have become one of the most common and popular ways to save money in India. Many customers may not know that a loan can be taken against an FD without having to break it. Many banks now provide loans that are collateralized against the value of your FD and it allows the customer to borrow money at a lower interest rate than a personal loan.

Why Consider Loan Against FDs?

• Low-Interest Rates: The interest rate for a loan against an FD is significantly lower than an unsecured loan.
• Retain Your Deposit: Your FD is kept intact and interest is accrued while the loan is being accessed.
• Simple Documentation: A loan against an FD is simple and quick with minimal paperwork needed.

Though the amounts of loans taken against an FD is a percentage of the FD’s value. The percentage is usually between 80 and 90. Not repayment of the loan is also subject to penalties and loss of interest of the FD.

4. Loan Against Insurance Policies

Do you know that your life insurance policy can also be used as a mortgage to get a loan? In India, many insurers provide loaning facilities using the surrender value of your life insurance policy. This also allows some liquidity. This type of loan, especially, can be very useful if you happen to hold a policy that has a good amount of surrender value accrued with it over the years.

Factors to Consider Loan Against Insurance Policies:

• Interest Rates Loans against insurance policies comes with much lesser interest rate as compared to personal loan.
• No Policy Benefits Impact A loan against your insurance policy does not affect the life cover and the policy shall remain in force.
• Approvals with More Ease In most cases, approvals are easy and quick because the policy has a cash value.

That is true with loans on life insurance policies. One should remember, though, that the loans tend to be based on a small percentage of the surrender value of the policy. Furthermore, should a loan remain unpaid, the insurer can and will deduct that amount from the policy benefits.

5. Loan Against Art and Collectibles

Not a lot of people know this, but a valuable antique, rare painting, or collectible can also be used to borrow money by taking out a loan with that item acting as collateral. It is mostly through specialized lenders that this option is available. If a person has a piece of art or a collectible item that is of high value, a loan can easily be obtained with that item pledged.

Why Consider a Loan Against Art and Collectibles?

• Higher Loan Amounts: When the collectible or artwork is of higher value, it is possible to secure a larger loan.
• Preserve Valuable Assets: You get to keep your valuable assets while raising money.
• Specialized Lenders: There are many financial institutions that focus solely on the value of the artwork and collectibles and will use them to offer loans.

That said, this does not suit everyone. It is more appropriate for people with high value assets that can be easily authenticated and accurately priced if they had to be sold.

6. Loan Against Property (LAP)

Unlike other alternatives, the loan against property collateral option is common. Indian banking and finance companies allow customers to borrow money by collateralizing residential or commercial real estate.

Why Consider Loan Against Property?

• Higher Loan Amounts: Getting a bigger loan is possible, depending on the property.
• Longer Repayment Period: Compared to most other loans, loans against property has a longer repayment duration.
• Lower Interest Rates: Given that the loan is secured against property, the interest is lower compared to loans that do not require collateral.

Comparison of Various Types of Loan Collateral

| Type of Collateral | Amount of Loan (Approx.) | Interest Rate (Annual) | Risk(s) | Flexibility in Repayment |