A Personal Loan proves useful when you want access to cash on an immediate basis. This collateral-free loan also comes with no end-use restrictions. But did you know that there are several alternative options that can help you get the funds you need? We assess the various alternatives to Personal Loans or secured loans that you can consider when you need funds urgently.
Loan Against Gold (Gold Loan)
A Loan Against Gold is a secured loan wherein you pledge gold as collateral. Lenders determine the loan amount based on the weight of the gold provided. As per RBI guidelines, lenders can provide up to 90% of the gold’s existing market value as the loan amount. Since a Gold Loan is a secured loan, the interest rates are relatively lower than those offered on Personal Loans.
Loan Against Property (LAP)
You can obtain a Loan Against Property (LAP) on properties with no debts associated with them. A noteworthy benefit of LAP is the higher loan amount – usually 80% of the property’s value. You also get lower interest rates as the property serves as collateral against the loan amount. LAPs are not Home Loans; therefore, you can use the loan amount without any intervention from the lender.
Loan Against Fixed Deposits
Banks offer an overdraft facility on your Fixed Deposit (FD) amount, which is a form of short credit. Typically, you can get up to 90% of the FD amount as your loan amount. This process is the quickest as it requires minimum documentation. By opting for a Loan Against Fixed Deposits, you do not have to break your FDs and can continue accumulating interest on them.
Loan Against Insurance
Loan Against Insurance is an excellent secured loan that doubles as an alternative to Personal Loans. When you opt for this loan, you pledge your fully paid life insurance policies to get up to 85% to 90% of the insurance value as the loan amount. Note that you cannot pledge money-back plans and Unit Linked Insurance Plans (ULIPs) to get Loans Against Insurance. Any unpaid EMI amount will be deducted from your insurance amount to compensate for losses.
Loan Against Provident Funds
You can obtain a loan by pledging funds deposited in your Public Provident Funds (PPFs) and Employee Provident Funds (EPFs) accounts. You can utilise this facility after two years of opening your PPF account and based on the funds deposited in it. As for loans against EPF deposits, you can get an advance on the funds deposited after the lender verifies your account, which you should hold for at least five years.
Loan Against Credit Card
A Loan Against Credit Card is essentially an unsecured Personal Loan which may offer better interest rates. For this you must apply for a Personal Loan on your credit card. If you meet the requirements, the bank credits the loan amount to your Savings Account. You also enjoy flexible tenures to repay the loan. However, like Personal Loans the bank will evaluate your spending patterns and credit history.
Things to Remember
While you can use any of the loans mentioned above to acquire a low interest rate loan, you should remember that most of these loans are secured loans with only the Loan Against Credit Card being an unsecured loan. Thus, if you are unable to repay the loan, lenders reserve the right to recoup their investment. For instance, lenders can auction off your gold, properties, or insurance policies. They may also utilise your FDs to recover the investment.
Choose HDFC Bank for all your Loan Requirements
Whether you need a Personal Loan, a Loan Against Gold, or a Loan Against Property, at HDFC Bank we have you covered. Choose from our extensive suite of loan products to get access to the funds you need.
Our quick loan processing procedures, coupled with flexible repayment options and low interest rates, can help your avail of the funding you need. Click here to get started on your Personal Loan application now!
Wondering how to increase your chances of an approval on your Personal Loan application? Click here to read more!
*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Personal Loan at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.