A loan against securities can be helpful to a great extent but it is essential to check the interest rate and charges involved when applying for it.
Liquidating assets can be disheartening, but for a person having financial troubles, it could be the only way to stay afloat. People work hard all their lives to accumulate wealth and assets, and some keep a backup plan for emergencies while others do not. When facing financial crisis, people have the tendency to take rash decisions and mostly opt for liquidating their securities. Doing so might help them temporarily, but at the same time it makes them vulnerable for future.
Instead of liquidating assets, you can opt for a loan. Banking instruments, like loan against securities, can help you to a great extent during financial crisis. These loans are provided by both banks and NBFCs and basically have an easy application process.
To apply for a loan against securities, you have to first fill out an application form with your details. Then you have to submit the form with the necessary documents. Once your form is submitted, the application will be forwarded to the lender for approval, for which he will assign a verification team that will verify your details and also that of the collateral. After verification, the lender will approve and sanction the loan, if he finds you credible.
Before you apply for a loan, it is important that you know some important aspects of loan against securities or loan against property. Factors like eligibility, documentation, interest rates and charges are an important part of any loan, whereas, in loan against securities you really need to look out for the interest rate and charges involved with the loan.
Interest rate and charges:
- Interest rate: Most of the banks and NBFCs charge you interest from 9-14 percent for a loan against securities. Since interest rate increases your overall repayment amount, it is important that you find a loan with the lowest interest rate.
- Charges: There are many charges that are involved in a loan against securities. Failing to take note of these charges can land you into trouble later. The most important charges in a loan are the processing fee, annual maintenance fees and prepayment charges. When you apply for a loan, you are asked to pay a processing fee which could be around 0.10 to 1 percent of the sanctioned amount. Since it is non-refundable, you have to find a lender that offers you a loan with low processing fee. The next comes the annual maintenance fee, which is added to the loan amount or taken after loan approval. Annual maintenance fee can be around 0.50 percent from most of the lenders. Lastly, you have to look for the pre-payment charges. Majority of the lenders in the market can charge you around INR 1000 to close the loan.