Shares or investment is another type of option considered by retail borrowers when they need urgent funds because they are cheaper than a personal loan. The cheaper options available for investment are loans against securities, mutual funds, shares, insurance policies, etc.
Keep reading the whole post to know if loan against securities is cheaper than Personal Loan.
Why should you take a loan against the securities?
As per the customer’s wants, the loan choice is based on the holding period of loan security. For example, if the borrower wants to avail of a loan for the medium term, a loan against the securities is the perfect choice for you rather than selling the securities. You can easily get the benefits of interest, dividends, and bonuses, with a loan against the securities. In this case, there is no need to sell the securities. This is the best loan option for short-term immediate fund needs.
Loan against the securities features
The interest rate and amount of the loan are based on the security as creditworthiness and collateral of the borrower.
Loan against the MF
The loan against the MF has been sanctioned based on the MF unit values that it holds. The loan provides you with more than 50% market value for MF. The funds that have a lock-in period, like equity link savings, are not pledged.
Loan against the shares
You are eligible for this type of loan against securities list. It gives you a chance to make the investment as equities and increase the loan when any emergency occurs. The amount of loan against the shares is varied with the market volatility. If the share values fall, the bank asks you to increase the security values by more shares or to put in the requisite cash funds.
Loan against the FD
Many banks provide loans against the FD. This is a secured investment, and banks will agree to give you 80-95% of the loan amount. The loan rate will be more than 1-2%. The best thing is that the banks do not possess the processing charge on loans against the FD.
Loan against the insurance
Many banks permit you to avail of loans against the insurance. Keep in your mind that the loan does not allow you to take against the term insurance policies or ULIPs. The amount of loan range is from 60% to 90% surrender values of insurance plan. It is easy to apply for a loan against the insurance plan if you buy the plan at least 3 years before the application for the loan.
Conclusion
All the above facts are in favor of a loan against securities that, makes it cheaper than a personal loan. Moreover, there is a need for customers to ensure that they get a low-interest rate, written proofs, and maximum LTV of all information related to an asset that needs in loan against the securities.
Also, there is a need for customers to stay cautious about exit clauses and prefer to take a loan that is closed without any foreclosure charges.
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