Amid the economic uncertainty triggering fears of job and income loss, lenders are likely to be conservative while issuing new loans for the next few months, which means only a limited segment of customers would be preferred by banks and other financial institutions. However, if one is in urgent need of funds, here are a few options one should consider first:
Loan against property (LAP)
It is sanctioned against the collateral of commercial, residential and industrial property. Interest rate starts from around 8.95%, and depends on lender, loan amount and credit profile of the applicant. Loan tenure can go up to 20 years. Loan amount will primarily depend on valuation of property and repayment capacity of borrower.
Gold loan allows borrowers to meet their fund requirements by monetising their gold jewellery. Most lenders disburse gold loans within a few hours of loan application. Loan amount can go up to 75% of the gold value determined by the lender and interest rate starts from around 9.10%.
Digital top-up home loans
Those with existing home loans can opt for digital top-up home loans. These loans too do not come with any end usage restriction of loan proceeds. Interest rates are usually lower than other loan alternatives available to an existing home loan borrower. Top-up home loans also offer longer tenure depending on the residual loan tenure of the existing borrower.
Loan against credit card
Credit card issuers sanction pre-approved loans to their existing cardholders on the basis of their card type, spends and repayments. Once a cardholder avails this loan, his credit limit will reduce by that amount. However, some lenders also offer loan against credit cards over and above the sanctioned credit limit.
Covid -19 personal loans
Some banks have started offering COVID-specific personal loans to help a select group of their existing customers who have their salary accounts with the bank or are existing home loan or personal loan borrowers from the bank and have a strong repayment history. These loans come with lower interest rates than regular personal loans and do not involve any processing fee either. Covid-19 personal loans usually have tenures of up to three years, though some banks are offering tenures of up to five years. Banks are also providing a moratorium of up to three to six months on these loans. However, borrowers need to pay the interest cost of the loan during the moratorium period.
Pre-approved personal loans
Most banks offer pre-approved personal loans to a select segment of customers, particularly those who have their salary account with the bank for some time or have had a long relationship with it. Since the bank is ware of the customers’ income, spends, EMI commitments, savings, employer etc., these loans are disbursed very quickly and are without any collateral requirements.
The loan amount one is eligible for and the interest rate offered depends on the individual’s income, employer, job stability, current debt, credit history, repayment capacity, etc., though it usually ranges from Rs 50,000 to Rs 20 lakh. Some lenders also claim to sanction higher loan amounts of up to Rs 40 lakh.
The writer is CEO and co-founder, Paisabazaar.com