Need an emergency loan? Take a loan against life insurance, KVP, NSC and mutual funds

This post was originally published on this site

Need an emergency loan? Take a loan against life insurance, KVP, NSC and mutual funds  | &nbspPhoto Credit:&nbspBCCL

New Delhi: Amid the coronavirus crisis, a lot of people have either lost their jobs or have experienced a salary cut. For many, the nationwide lockdown has completely eroded their savings and income. These people are facing severe liquidity issues and a cash crunch. Loan EMIs, necessary expenses, utility bill payments have to be done. However, some are witnessing a severe cash crunch and are considering liquidating their investment. 

So, in such a scenario, taking a loan against security is better than selling off your investments in some cases. While your security is with the lender, it can continue to grow.

According to HDFC Bank’s website, you can get a loan against multiple securities. But the amount lender will give you against the security varies.

For equity shares and mutual funds, HDFC Bank offers 50% of the present value of the loan. A borrower can get 80% against the net asset value (NAV) of a debt fund and life insurance policies. Against National Savings Certificate, Kisan Vikas Patra, and non-convertible debentures, borrowers can get up to 70% of present value.

Loan against Mutual Funds: If you need money for a short period of time like six months or so, you don’t need to sell your mutual fund units. You have the option of borrowing against your mutual fund units. This will help you as neither will you be redeeming your mutual funds nor will you be stopping your systematic investment plan (SIPs). 

One of the biggest advantages of getting a loan against a mutual fund is that you don’t have to sell your units prematurely. Generally, you can expect an interest rate of about 10-11% on the mutual fund units.

Personal loan: This is definitely better than simply paying a huge bill from your credit card. It is easier to get such loans from lenders with which you already hold an account. The pre-approved limit can make it easier and faster to get loans when you need them most. This is usually best suited for existing customers of a lender who have had a long-lasting relationship with the bank.

For new customers who have had their KYC done digitally may also get the approval for a loan within the same day. The interest rates on such loans are typically between 9-16%.

Loan against shares: Most lenders typically lend against at least two shares. But some can also give a loan against a single share. But they need to be part of the bank’s approved list. Kotak Mahindra Bank, for example, has a list of 749 stocks against which it lends.

Table compiled by:

Related Posts