It is rightly said that det is a two pinned sword wherein both the parties, money lender and the borrower can hurt each other. If managed properly, debt can become an advantage for the borrower. It can aid you achieve your monetary goals and help you grow as an individual. There is a saying that the richer you get, the more you can borrow. The former statement is true as your creditworthiness increases when your capital does, and you become mature in the eyes of the money lenders.
Certain types of assets are instruments that can assist you with meeting your own and business needs. These resources can be your immovable property, physical precious metals, mutual funds, equities, securities, FDs, bonds, and real estate etc. You can get a credit against any of these monetary instruments to satisfy your necessities whether they are personal or for the venture. The loan you take up against your residential home or commercial property is known as a loan against property and a loan borrowed against financial assets is called “loan against securities”.
This is one of the most common types of loan taken by Indians. Gold is a precious metal that is regarded as a haven in the world of capital markets. There are two ways you can repay the loan. First is the simple EMI method where the interest rate is charged and the other is the bullet method wherein the principal is given and then EMI’s are declared by the money lender.
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Criteria |
Detail |
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Amount |
A maximum 80%-90% of the value of the asset can be availed. The minimum loan amount for most institutions is INR 1000 and the maximum is around INR 2 crore. |
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Interest rate |
Varies between 8% - 30% |
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Term time |
6 - 24 months |
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Condition |
Aged 18-75 can apply for such loans and the purity level of the precious metal should be 18-22 carat. Lenders will only take into account the value of the gold in that which is pledged, and any precious stones, other metals, making charges, etc. will not be considered. |
Loan against the Fixed deposit is quite common as it is considered as a safe investment. This is one of the famous ones among the money lenders as there is no effort to flip its state if the borrower defaults the installments.
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Criteria |
Detail |
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Amount |
You can avail up to 95% of the Fixed Deposit value. |
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Interest rate |
This kind of credit can cost you around 1-2% more than what you are receiving as an interest. |
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Term time |
The only protocol here is that you cannot exceed the FD term time. |
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Condition |
Aged 21 years or above can apply for such loans. |
Mutual funds and shares are usually considered as risky investments which is why the lenders do check the performance of the fund while lending money to the borrower. Mutual funds are not managed by the retail investors which is why it is given a higher priority than the sole equities or shares. Shares come under highly risked but are capped with the same rules like the mutual funds when availing a loan. Loans taken against such instruments are called Loan against Securities. At Fullerton India, we provide this facility against financial assets such as bonds, mutual funds, shares, ETFs, etc.
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Criteria |
Detail |
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Amount |
INR 5 lakhs - 5 crores, loan amount sanctioned will depend on the lender and the value / risk of the pledged assets. |
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Interest rate |
10% per annum onwards. |
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Term time |
upto 3 years |
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Condition |
Applicants must be above 18 years of age, should have a stable income source and a good credit score. |
PPF (Public provident funds) is an instrument plus tax saving term which is backed by the government of India. It was introduced 50 years back and is still one of the favorites for the crowd. PPF is commonly used as a collateral for availing a loan as it is backed by the governments, are tax free and have higher ROI than the FD.
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Criteria |
Detail |
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Amount |
25% is the maximum amount |
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Interest rate |
2% more than the PPF amount |
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Term time |
3 years |
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Condition |
Loan can be availed from the 6th year of opening the account. |
Loan against property can be used for many purposes like the venture, education, personal expenses etc. The property should be free hold while availing such a loan. Some of the conditions are mentioned below:
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Criteria |
Detail |
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Amount |
upto a maximum of 60-70% of the market value of the property, final amount sanctioned will depend on the applicant’s eligibility as well as the lender’s policy |
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Interest rate |
9% per annum onwards |
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Term time |
1 to 15 years |
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Condition |
CIBIL score must be above 700. Applicant must own the property solely, and it should be free of any litigation / mortgage. The applicant must also have a stable income, and meet the rest of the lender’s eligibility criteria. |
It is true that there are many ways to avail a loan these days but being a borrower, you must be smart with the loan product you select so that it fits your requirement perfectly. Once a loan is availed, it is crucial to stick to the agreed upon repayment schedule so that the assets you own are secured. It is considered a smart move to take a loan against one’s assets in order to get the funding one needs.
