Your money: Can’t get a personal loan? Discover other options

0

Personal loan is one of the most preferred loan options for meeting urgent financial needs as it requires minimal paperwork, has quick disbursement and has no restrictions on the end use of the funds.

By Gaurav Aggarwal

Personal loan is one of the most preferred loan options for meeting urgent financial needs as it requires minimal paperwork, has quick disbursement and has no restrictions on the end use of the funds. However, the unsecured nature of personal loans causes lenders to exercise caution when evaluating loan applications, which often leads to loan applications being rejected.

Here are some alternative loan options borrowers can consider if their personal loan application is rejected:

Loan on property (LAP)
The property loan is disbursed against collateral for commercial, industrial or residential land. Given the secured nature of the loan against the property, their interest rate is lower than that of unsecured loan options. The LAP interest rate is 7.95% to 13.10% per annum and the loan amount can be up to 70% of the market value of the property. The maximum loan term can be up to 15 years, with some lenders offering a longer term of up to 20 years. Therefore, those who need a larger loan amount and/or a longer term for small EMIs can opt for the LAP. On the other hand, disbursement of the loan against the property may take 2-3 weeks due to a complicated approval process.

gold loan
Gold loans help borrowers alleviate their financial needs by monetizing their idle gold. Lenders usually disburse gold loans the same day the loan application is received. However, the maximum duration of gold loans is between one and three years. Some lenders offer a longer loan term of up to five years. The interest rate on gold loans is 7% to 29%.

The amount of the loan mainly depends on the valuation of the gold deposited as collateral and the Loan-To-Value (LTV) ratio sanctioned by the lender. Interest rates on gold loans are much lower than unsecured loans due to the low credit risk involved.

Additional real estate loan
Supplemental home loans can only be used by existing borrowers with a good repayment history. The eligible loan amount is usually the difference between the outstanding home loan amount and the original loan amount sanctioned by the lender. The term of the additional home loan cannot exceed the residual term of the initial home loan, with lenders capping it at 15 years. The interest rates of the complementary real estate loans are generally the same or slightly higher than those of the underlying real estate loans.

While it usually takes 1-2 weeks to process supplemental home loan applications, a few lenders offer pre-approved supplemental home loans to existing borrowers with same-day loan disbursement.

Securities loan
Securities lending (LAS) is offered against bonds, stocks, ETFs, mutual funds, NSCs, life insurance policies, KVPs, and more. This facility allows investors to monetize their existing investment without compromising crucial financial goals. The borrower will continue to receive credit for dividends, bonuses, interest, etc., on the pledged collateral. The amount of the loan depends on the type of collateral offered as collateral and the LTV ratio assigned by the lender for the securities pledged.

LAS is usually offered as an overdraft facility with a sanctioned credit limit. The borrower is free to draw the entire sanctioned limit or part of it according to his monetary needs. The interest component of the securities loan is charged on the basis of the amount withdrawn until it is repaid, and can be from 9.05% to 18%.

The author is Director, Unsecured Loans, Paisabazaar.com

Share.

Comments are closed.