Financial crisis is often unpredictable, but liquidating your assets might not be the right thing to do.
It is nearly impossible to predict the future and the problems that we may face in time. Perhaps the best we can do to avoid them is stay prepared with a backup plan. To stay away from situations like these, most people start saving money from an early age, whereas, some people invest in lucrative sources hoping for long term gains.
Since financial emergencies don’t strike by measuring your pocket or by checking the amount of investments you have made, in times of crisis, both of the above mentioned people might end up reconsidering their financial decisions. While savings might keep you afloat for some time, when you run out of emergency funds, there are chances that you might look forward to liquidate your assets.
Liquidating assets mean selling or transferring your investment instruments to a buyer or investor. Though it may seem a great way to fund your financial needs, remember, temporary solutions are not always the best ones. You can use these investment instruments in a different way and fund your financial needs; you can opt for a loan against securities.
What is Loan against securities?
Loan against securities is a type of facility provided by banks and NBFCs, which allows you to loan money by keeping something as collateral. The amount you borrow from the banks depends on the type of collateral you offer to the lender.
Here is a list of financial instruments that you keep as collateral with the lenders:
- Insurance Policies
- Non-convertible Debentures
- NABARD Bonds
- UTI Bonds
- Mutual fund units
- Demat Shares
- National Savings certificate or KVP (in Demat form)
- Bank Deposits
Benefits of Loan against shares:
- High Loan amount: When taking a loan from the bank, the biggest problem you might face is the loan amount. A personal loan or a credit card loan might not be able to satiate your financial crisis, whereas, a Loan against Securities offers you credit up to 10 crores.
- Lower interest rates: A credit card loan may seem easy and convenient to avail but it can really land you into serious trouble later. The first and the most common problem people face with credit card loans is the high interest rates. Some credit card companies offer loan with interest rates up to 17 percent, which can be a pretty high amount during financial crisis. On the other hand, when you avail a loan against property, shares or stock invested, the interest levied is as low as 9 to 14 percent.
- Lower EMIs: This is a lesser known benefit but there are some lenders that offer the advantage of lower EMIs. The lenders allow the applicant to pay only the interest amount as EMI and the principal amount at the end of the tenure. There are also lenders that levy interest rates on the utilized amount and not on the amount you are borrowing.
When applying for a loan against securities, it important that you read the terms and conditions carefully and consult your loan advisor if you have any doubts. You can contact our team of experts.