Sometimes we may face monetary
problem in such a way that we need to take help of friends, family or taking a
personal loan from the bank. Personal loan is a loan which is given by bank
mostly without security. It may be account overdraft or loan amount credit to
the account. The problem is that when we need money, we don’t think about rate
of interest banks charging on the personal loan. It always hurts only when
repaying it.
Instead
we can take collateral loan, a loan against securities which has always less
rate of interest compare to personal loans. Loan against securities includes
against shares, debentures, gold or some assets. The rate of interest is around
12 to 15% on loans against securities compare to 16 to 24% on personal loans. But
the disadvantage is that one need to block the assets with the banks for the
period of loan taken. This can be both advantage and disadvantage. It may
depend many factors like amount of loan and purpose of loans etc. which are as
under.
Loan
purpose
Loan
purpose is very important for choosing what type of loan one should take. Like
if one is taking loan for smaller period, he can opt for loans against
securities or gold loans whereas in the case of loans for long time, one can
choose loans against property. The loans against gold and securities generally
fetch a less amount of loan compare to market value of the movable assets. Some
loans have the processing fees and some have the interest rate as such if you
don’t use the funds, still you need to pay some 1% interest rate or so. So loan
purpose is the first factor which tells you as what type of loan to choose
from.
Documentation
There
is a big different in the document required in loans against property and loans
against gold or securities. Loans against gold or securities needs less
documents compare to loans against property. In the case of loans against
property, banks need to ensure about the repayment ability of the lender. So banks
put a lot of documents as well as check about the credit history of the lender.
If the credit history is negative, it’s impossible to take a loan against
property which is not in the case of loans against securities or gold loan.
Time
Time
is also an important factor as the loans against property can consume 15 to 30
days in processing. If there is a time in hand one can go for loans against
property whereas if funds required immediately, one has no options but to go
with loans against securities.
Other factors
Banks always approve the loans less than the
market value of the security. This is different with assets to assets. In case
of loans against shares, banks approve the loan around 40-45% of the market
value of shares as market is so volatile that the prices of shares can go and
up anytime. In case of gold loan, banks offer 60-70% of the market value of the
gold as loan as the prices of gold is less volatile compare to securities.
In
case of the loans against property or overdraft against property, one need to
repay the proportion of loan every year and in the long run, the value of
property will only rise which is a safe bet for both the banks and the lender.
In case of loans against shares, if the value of shares decreases and comes
around 120-130% of the loan takes against these shares, banks may ask you for
some other shares.
Tags-personal loans,collateral loans,loans against securities
