Your alternatives to personal loans

Personal loans, being unsecured by nature, are priced much higher than a loan that has a security attached to it. For smaller loans, you needn’t collateralise your home or your vehicle, you can borrow against smaller market-linked securities or those having a fixed value

With consumer spending on the rise and loans being an expensive option, it is time to find other sources from where you can generate a cash flow from. Should you look at additional income by way of a part time job? That would be a little too taxing. Is it then, not better to unlock your existing assets by taking a loan against them, while preserving their value? And yes, we are not asking you to sell your assets off. Only borrowing against them as a security, instead of taking a personal loan!!

You can borrow against smaller securities that could range from being market-linked such as equity shares, mutual Funds, ETFs, gold deposit certificates, RBI bonds to those having a fixed value such as traditional life insurance policies, National Savings Certificates (NSC), Kisan Vikas Patra (KVP), NABARD's Bhavishya Nirman Bonds and Non Convertible Debentures.


Consider this: For loans against securities from Axis Bank, the interest rates would be 13% for an amount below Rs 10 lakh and 12.75% for amount above Rs 10 lakh, whereas for personal loans, it could range anything between 15% and 24%, irrespective of the amount of apply for. And if you take a personal loan from ICICI bank, it charges you anywhere between 16 to 18.5%, whereas, for Loan against security, for amount below Rs 10 lakh, interest of 13.5% would be levied and for loan from 10 to 15 lakh, 13.25% of interest rate would be levied. 

There is a difference in securities that banks and financing institutions would give loan against and also in the loan-to-value ratio or LTV, which is the ratio of the value of the security that will be given you as a loan. Generally the LTV is as low as 50% for market-linked securities such as equity shares and equity mutual funds, due to their volatile nature and as high as 80-90% for debt mutual funds and other debt-based investments.

For traditional insurance policies, the eligible amount is benchmarked against the surrender value. For example, for an LIC endowment policy, the maximum loan amount available would be 90% of the surrender value of the policy (85% in case of paid up policies) including cash value of bonus, where surrender value is 30% of the total premiums paid (for at least three years), excluding premiums for the first year and all extra premiums. This means you cannot take loans on traditional policies before you have paid premiums for at least three years.

For loans against fixed deposits, banks generally levy a margin over and above the rate allowed for the deposit. For example Punjab National Bank offers loans against fixed deposits at an interest rate of 2% over and above the rates offered on fixed deposits. For example if you apply for loan against a Rs50,000 fixed deposit that has three to four years remaining to maturity, you would be provided Rs40,000 as loan, 10% retained as the margin amount. Comparatively lower margins are retained for present, retired and widows of staff members.

Loans against KVP/NSC are provided at rates connected to the base rate by banks, for example, Allahabad bank  charges base rate+4%, effectively 14%, as of today.

The idea behind taking a loan against securities of smaller value springs from facts that you do not need to pledge large assets for small loan amounts and do not need to spend on their valuation and legal documentation. On the other hand, they are better then personal loans due to their inexpensive nature and speedier processing.

Our suggestion

Before pledging your assets for loans, think of why and for what time you invested in them. Term plans, for example, are protection products and we advise not taking loans against such products, which could harm you in case of eventuality. In case you have a cushion on insurance policies apart from the basic term plan with adequate cover, you may opt for taking loans against the other policies.

Other than insurance plans, check how taking a loan affects your alignment of goals that you made these investments for. An example—taking a three-month loan against an equity mutual fund you invested in for your daughter’s marriage, 18 years from now. Such loans do not erode your wealth, due to the virtue of time that you have on your side. Avoid pledging securities near maturity, or you will lose out on your objective of investment.



Rajesh Khroliya

2 years ago

i have need of 60000 rupees as a personal loan

please help me..

Rajesh 8745878332
[email protected]

GDP to grow at 6.6% in FY14: Espirito Santo Securities

Espirito Santo Securities has repeated a commonly used term applied by financial institutions these days —“constructive outlook”—for the current calendar year. The brokerage expects IT and pharma to do well and capital goods to suffer


Espirito Santo Securities (ESS) has sounded yet another optimistic assessment of the current calendar year by pegging GDP growth rate forecast for FY14 at 6.6% while similarly it also expects inflation to be in the region of 6.6% for the same period. Further, it believes that the Reserve Bank of India (RBI) will cut the repo rate by 25 basis percentage points (bps) in the upcoming policy meet on 29th January and a further 100 bps through March 2014. In its “Little Black Book” monthly newsletter it said, “We think this year will see a mild recovery in growth, rising from 5.5% in FY13 to 6.6% in FY14, through base effects, rate cuts, rising domestic business confidence and a slow but steady improvement in Asian and global growth helping exporters, whose competitiveness has materially improved post rupee depreciation.”


For more analysis by Moneylife on Espirito Santo Securities reports, click here.


For forecasters, it is very easy to sound cautiously optimistic, especially when the situation is so unpredictable right now. Most brokers adopt this line and ESS is no exception. They call it “constructive outlook” and it is the least ‘damaging’ stand to make if their forecasts go wrong. The note said, “Overall we are not raging bulls but on balance we see a constructive 2013 outlook for Indian equities.” While expressing optimism on the GDP growth rate and overtly optimistic on RBI cutting interest rates through March 2014 (without stoking inflation), it feels that Indian economic recovery will take at least a year. It said, “We think any meaningful recovery in the investment cycle could be 12 months away and we think that investors’ expectations have run too far ahead, leaving many Industrials and Cap Goods stocks exposed”.


ESS, in its newsletter, has suggested clients could invest in Lupin, Persistent Systems and Tech Mahindra as the rupee may depreciate, which could also provide a fillip to the pharma and information technology sectors. At the same time, the brokerage also suggests avoiding capital goods sector and has pegged sell calls on BHEL, BGR Energy Systems and Thermax. Furthermore, it is bullish and sees value in mid-cap stocks such as Federal Bank, Sterlite Technologies, Motherson Sumi. We’re surprised that they’ve included Sterlite Technologies in the list, which isn’t exactly a well-governed company. These mid-cap companies “allow investors to add beta without compromising on quality”. In other words, these are really ‘volatile’ companies which will do well when market rises but also do badly when markets fall. Besides, we certainly do not think Sterlite Technologies is a ‘quality’ stock. Why would they advise clients to make their portfolio more volatile?


ESS also advised clients and investors to consider the political scenario in 2013, which could play a pivotal role in the markets. And it is anybody’s guess how this will pan out. According to ESS, “Investors will have to face up to the fact that the outcome is unusually uncertain and potentially unstable.”


India sends back all nine Pakistani hockey players

Hockey India had initially decided to send back the Pakistani players of Mumbai Magicians franchise only but fearing that the league could be affected by disruptions, it took the decision to send back all the players


New Delhi: The simmering tension on the Indo-Pak border on Tuesday spilled over to the sporting arena with a rattled Hockey India (HI) deciding to send back all the nine Pakistani players taking part in its high-profile league following protests over the killing of Indian soldiers, reports PTI.


After protests by Shiv Sena and other right-wing organisations disrupted the training and the first match of the league, Hockey India took the decision to send back the Pakistani players considering the “extra-ordinary circumstances”.


“After discussions with all the stakeholders, the Hockey India and Pakistan Hockey Federation (PHF) have mutually decided to send them (Pakistan players) back due to an extra-ordinary situation which has arisen,” Hockey India secretary general Narinder Batra told reporters.


“We kept all stakeholders the franchises, PHF and HI in the loop during these discussions. We took all on board before making this decision. All have approved this decision.


“The contract money for 2013 will be paid in full to the Pakistani players and HI stands committed in guaranteeing the same.


“We and PHF have mutually decided to release the players so that they do not feel the mental stress and their performance is not affected,” Batra added.


Batra said that the franchises, which had to release the Pakistani players, were free to seek their replacements.


“We will give the right to franchises which own Pakistani players that they can ask for replacements. They can select from the reserve pool within their allocated budget,” Batra said.


HI had initially decided to send back the Pakistani players of Mumbai Magicians franchise only but fearing that the league could be affected by disruptions, it took the decision to send back all the players.


The nine players who would be sent back are Mahmood Rashid, Fareed Ahmed, Muhammad Tousiq, Imran Butt (Mumbai Magicians), Mohammed Rizwan Sr and Mohammad Rizwan Jr (Delhi Waveriders), Kashif Shah (Jaypee Punjab Warriors) and Muhammed Irfan and Shafqat Rasool (Ranchi Rhinos).


The league ran into rough weather after the killing of two Indian soldiers by the Pakistan Army on 8th January in Poonch sector of Jammu and Kashmir.


Mumbai Magicians, based in Mumbai, became the obvious target because of its large number of Pakistani recruits and the presence of right-wing outfit Shiv Sena’s stronghold on the city.


Over 100 Sena workers had protested against the participation of Pakistani players in the Mumbai franchise and disrupted the scheduled practise session on Sunday. This prompted the team management to shift base to Delhi.


On the inaugural day, two supporters from Hindu Yuwak Sabha attempted to invade the turf at the National Stadium, the venue where the opening match between Delhi Waveriders and Punjab Warriors was on yesterday.


The Mumbai team is scheduled to play its first match against Delhi in the capital tomorrow. Their first home match in the tournament is scheduled for 20th January against the Punjab team.


Mahmood Rashid was the most expensive of the Pakistani players with a price of $41,000 (about Rs22.32 lakh) while Tousiq went for $27,000 in the auction.


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