There are several instances where individuals may require external funds to compensate for certain financial shortcomings. There are 2 primary options to resort to in such circumstances: secured loans and unsecured loans.
Generally, it is easier to obtain secured loans if an individual already owns the appropriate collateral. Among these, gold loans constitute a popular borrowing option, given their numerous benefits. However, there are several other types of secured loans as well. These include loans against FD and loans against property.
Prospective borrowers confused with the availability of such a variety of funding options must first know about each loan type in detail to opt for the right one.
What is a loan against FD?
Individuals holding a fixed deposit or FD account can collateralise this FD to avail funds against it instead of opting for premature withdrawal. Both individuals and joint account holders can avail loans against FD, irrespective of whether their account is domestic or NRI. However, accounts of minors and 5-year tax-saving FD holders cannot avail this benefit.
● Key features
- The available loan amount depends on one’s investment in an FD. Generally, borrowers can avail up to 90% of their FD amount. Therefore, it is advisable to pledge an FD which has a deposit amount at least 10% higher than their required loan amount.
- Loans against FD generally come with lower interest rates compared to that of unsecured loans, mostly 1-2% higher than the FD rate.
- Borrowers can enjoy a maximum tenor of 5 years against this financial product.
- Individuals have to complete their repayment within their FD tenure.
What is a loan against property?
A loan against property is another type of secured loan that individuals can avail by mortgaging a piece of property. This includes residential as well as commercial property. This property will remain mortgaged with the lender until the completion of loan repayment.
● Key features
- Individuals can only mortgage a piece of property that they have in their name or own jointly. Additionally, there must not be any existing property loan running against this house or land.
- Borrowers can avail a loan amount worth up to 80% of their property’s value.
- Financial institutions offer repayment tenure of up to 20 years against this financial product.
- Borrowers can also claim tax benefits on such funds depending on their end-use.
What is a gold loan?
As the name suggests, a loan against gold requires individuals to pledge their gold jewellery items to avail funds against them. Gold loans constitute the most commonly sought-after borrowing mode due to their easy availability. Like other secured loan options, the loan amount depends on the value of gold items, which is determined by their weight, purity and current market value.
● Key features
- Individuals can only collateralise gold ornaments. Gold coins and bars are not accepted.
- The pledged gold jewellery items must have a purity of 18 Karat or above.
Individuals can refer to this guide on gold ornaments to pledge to get the highest loan value for better understanding.
Besides, prospective borrowers must also know about the benefits that this financial product offers to understand its usefulness for them.
How is a gold loan more advantageous than other secured loans?
Here are some of the primary benefits that a gold loan offers.
● Easy eligibility: Given the secured nature of this funding option, lenders do not set stringent eligibility parameters for a gold loan. Financial institutions do not prioritise checking CIBIL scores, and even individuals without a stable income source can opt for these funds.
● Minimal paperwork: Besides easy eligibility, a gold loan also comes with a very brief documentation process, unlike other secured funds like a loan against property. Applicants only need to submit their KYC documents as ID and address proofs.
● Fast disbursal: Owing to the lenient eligibility parameters and minimal paperwork involved, lending institutions undertake a brief verification process, aiding in speedy approval and disbursal.
● Compact tenure: Most gold loan providers offer schemes with short repayment tenure. While this may seem disadvantageous due to the resultant hefty EMIs, it actually helps borrowers save substantially. This is because shorter tenure will result in a lesser number of monthly instalments, thus reducing a borrower’s total interest outgo. This makes a short-term gold loan more affordable than secured loans with longer tenures, and is one of the ways to manage gold loan repayment efficiently.
While several lenders offer these advantages against a gold-backed loan, it is important to choose the most suitable one to enjoy the best offers. Rupeek Fintech is one such gold loan provider which lets you enjoy the above benefits along with a bunch of other advantages.
Avail the best offers with a gold loan from Rupeek
Here are some of the benefits borrowers can enjoy against a gold loan from Rupeek.
● Flexible repayment: Borrowers can choose from flexible repayment options, depending on their financial standing. Individuals with regular cash flow can opt for the traditional EMI payments. Alternatively, those lacking a steady source of income can choose to pay any amount at any time within the tenure. This also includes a one-time bullet payment.
● Lowest interest rate: Rupeek offers the most affordable gold loans, with interest rates starting at 0.49% per month. Applicants can choose from a variety of schemes as per their suitability. Additionally, borrowers can make part payments and also close a loan before the completion of its tenure without incurring any extra charges.
● Lump-sum loan amount: Individuals can avail up to Rs.1.5 crore with our highest LTV ratio of 80%. However, note that the approved amount will depend on the current gold rate as well as the purity of pledged items. You can estimate the loan amount available against your gold ornaments using our online loan calculator. At the same time, you can get an idea of the total interest payable against your borrowed funds and plan your finances accordingly.
● Easy online application: Individuals can get access to easy online gold loans with our easy loan application procedure. All they need to do is visit our website or app and place a loan request with name, residence, and all fund requirement details. Thereafter, they can complete all formalities with our loan representative from their home.
● Ultimate collateral security: With our ISO 9011:2015 certified security procedures, borrowers need not worry about the safety of their pledged collateral. Post loan approval, the loan manager will seal the gold items in a GPS-secured bag and deposit them to the nearest partner bank. There, the jewellery items will be stored in high-security vaults under military-grade surveillance. Additionally, Rupeek fully insures your gold ornaments against any sort of damage or theft.
● Gold loan overdraft facility: Besides the above beneficial features, existing Rupeek customers can also avail an overdraft facility against their gold, titled Rupeek Quick. The added advantage of this feature is that you only need to pay interest on the utilised amount. Also, individuals need not submit any additional documents.
Having a detailed knowledge of each of the above types of secured loans is important to help individuals choose the most suitable one in times of financial emergency. However, it is important to note that each loan type serves a specific purpose and comes with their unique challenges. Therefore, opting for one that aligns the best with your requirement should be the ideal goal.
Frequently Asked Questions
- Can I use internet banking to opt for a loan against FD?
The availability of online loans against FD varies across lending institutions. However, individuals can easily apply for a loan against gold online with Rupeek.
2. What are the documents required to get a gold-backed loan?
Applicants need to submit their KYC documents, such as voter ID, Aadhaar card, PAN card, and driving licence, as their ID proof. They also need to provide any one KYC document or utility bills as a proof of their address.
3. Can I use a gold loan to fund my child’s education?
Yes, borrowers can use a gold-backed loan to finance all sorts of personal requirements, including paying their children’s school/college fees.