There are many times when people need cash urgently, but can’t turn up with the needed amount from their present resources. During the pressing times, taking up a personal loan appears to be the single way out. A few people also are tempted to avail the personal loans because they can be availed for any personal necessity, minimum paperwork is involved in processing as and being unsecured loan banks generally don’t ask for collaterals.
But owing to its high rate of interest, it also is one among the most costly options for fulfilling your urgent money needs. Most of the banks charge between 15% – 24% interest on personal loan. In the terms of being costly, personal loan is second to taking cash advance on credit cards that have interest rate of more than 30%. Due to the high interest rate, it really becomes unviable for a few people to take up these personal loans.
Seeing the drawbacks linked with personal loans, an individual is made to think about what can be a good alternative to this. Nowadays, there are other cheap options available on the market that can be utilized to raise money for different purposes in a very short time period. Below are the six best alternatives available that would cost lower interest rates than personal loans:
Loans against Fixed Deposit
: This is the best and quickest possible loan available because banks lend quickly against their fixed deposits. The repayment of this kind of loan must be done within a fixed deposit term. The biggest benefit associated with loans against fixed deposits is that minimal documentation is required and loan is available for over 80% of fixed deposit value. In addition, your fixed deposit persists to earn interests even during the term of the loan. But, you should discipline yourself to reimburse the loan each month as an equated monthly installment or EMI.
What originally started as a famous source of finance within the semi-urban and rural areas, have now become extremely famous in the metros too. This kind of loan offers instant liquidity on the base of one’s jewelry without needing to sell it. Furthermore, there aren’t any pre-payment fees and processing charges. The loan amount in this depends on the weight and purity of the gold which is given. Though this loan doesn’t necessitate prior credit history, the banks are going strict on these after current RBI regulations. Additionally, the interest isn’t cheap and is similar to personal loan.
Loans against Property:
You also can borrow against a property you possess and the loan’s amount can be calculated on the value of the property and borrower’s capability to pay back. Re-financing a property is a good option if you wish to increase the value of your loan or the property’s worth has risen in a certain time period. Failure in timely repayment can lead to loss of ownership of the property and thus absolute care should be taken, as the property is generally of higher worth than any other kind of security.
Loans against Shares
: Banks also lend money against shares of particular companies you hold. However, all shares don’t qualify you for such loans. Every bank has a diverse list of agreed securities which meet the criteria for such loans and the amount depends on valuation of securities and abilities to service and repay the loan. Though you can get cash without liquidating your investment, the sum granted as a part of the security provided is much lower in comparison to other kinds of loans. With current volatile stock markets, it may not come quite cheap too.
Loan against Life Insurance Policy:
Loan which is granted on life insurance policy deals have low rate of interest and simple options for repayments. The loan’s amount is based on the worth of your policy. It may be paid back anytime during the policy’s term. In the incident of unpaid loan amount, the interest will be cut down from the claim. It is a fast loan with least documentation.
Loans against Public Provident Funds (PPF):
Loan can be also taken against PPF; however, with a tenure of 2 years only. If this first loan is paid back, then the borrower is allowed for another loan within 3 – 6 years of an account opening. The advantage of this particular loan is that now you can borrow money without breaking off your PPF and with minimum documentation.
You can now select anyone of the above mentioned alternatives as per your comfort. If you’re in dire need of money, but for a very short time period, you may want to consider the alternatives mentioned above. Evaluate your financial position and need before deciding to go for any type of loan, as they will have direct effect on your financial plans.