Your Money: Not getting a personal loan? Check out other options
April 6, 2021 3:00 AM
Personal loan is one of the most preferred loan options for meeting urgent financial requirements, as it requires minimal paperwork, has quick disbursal, and comes with no restrictions on end usage of funds.
Gold loans help borrowers mitigate financial need by monetising their idle gold.
By Gaurav Aggarwal
Personal loan is one of the most preferred loan options for meeting urgent financial requirements, as it requires minimal paperwork, has quick disbursal, and comes with no restrictions on end usage of funds. However, the unsecured nature of personal loans makes lenders exercise caution while assessing loan applications, often leading to the rejection of loan applications.
Here are some alternative loan options which borrowers may consider if their personal loan application gets rejected:
Loan against property (LAP) Loan against property is disbursed against the collateral of commercial, industrial or residential plots. Given the secured nature of loan against property, their interest rate is lower than unsecured loan options. LAP interest rate is 7.95%-13.10 % p.a. and the loan amount can be as high as 70% of the property’s market value. Maximum loan tenure can go up to 15 years, with a few lenders offering longer tenure of up to 20 years. Hence, those who require a bigger loan amount and/or longer tenure for smaller EMIs can opt for LAP. On the flip side, the disbursal of loan against property can take anywhere between 2-3 weeks due to complicated approval process.
Gold loan Gold loans help borrowers mitigate financial need by monetising their idle gold. Lenders usually disburse gold loans on the same day of receiving the loan application. However, the maximum loan tenure of gold loans is between one and three years. Some lenders offer longer loan tenure of up to five years. Interest rate on gold loans is 7%-29%.
The loan amount primarily depends on the valuation of gold deposited as collateral and the Loan-To-Value (LTV) ratio sanctioned by the lender. Gold loan interest rates are much lower than unsecured loans because of the low credit risk involved.
Top-up home loan Top up home loans can only be availed by existing home loan borrowers with good repayment history. The eligible loan amount is usually the difference between outstanding home loan amount and the original loan amount sanctioned by the lender. The tenure of top-up home loan cannot surpass the residual tenure of original home loan, with lenders capping it at 15 years. The interest rates of top-up home loans are usually the same or a little higher as compared to those charged for underlying home loans.
While the processing of top-up home loan applications usually takes between 1-2 weeks, a few lenders offer pre-approved top-up home loans to existing home loan borrowers with same-day loan disbursal.
Loan against securities Loan against securities (LAS) is offered against bonds, shares, ETFs, mutual funds, NSC, life insurance policies, KVPs, etc. This facility allows investors to monetise their existing investment without compromising on crucial financial goals. The borrower will continue to receive the credit of dividends, bonuses, interest, etc., on the pledged collateral. The loan amount depends on the type of security offered as collateral and LTV ratio assigned by the lender for pledged securities.
LAS is usually offered as an overdraft facility with a sanctioned credit limit. The borrower is free to draw the entire sanctioned limit or a part of it as per his monetary requirement. The interest component of loan against securities is charged basis the amount drawn till its repayment, and can be 9.05%-18%.
The writer is director, Unsecured Loans, Paisabazaar.com