Loan Against Assets - Financial Instruments against which you can take a Loan

Nutan Gupta

03 Nov 2016

Investments are meant to be made for long-term. However, these investments can be used to take short-term loans when need arises. Personal loan is the most widely known loan people resort to when in need. Little do they realise that one can take loan against some financial instruments too.

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Loan against Gold

As the name suggests, one can take loan against physical gold. As per the RBI rule, the loan to value (LTV) is maximum 75%. This means that if the value of your gold is Rs. 100, you are eligible for a loan of Rs. 75. The interest rate ranges from 12-17%. During an emergency, one can opt for gold loans, instead of applying for a personal loan with a bank.

Loan against Life Insurance Policy

A person can also take loan against his life insurance policy. An individual is eligible for a maximum loan of 85-90% of the surrender value. The interest rate ranges between 9-10%.

Loan against Fixed Deposit

One can also avail a loan against his fixed deposit. However, the minimum tenure of the loan is the term of fixed deposit. The maximum loan to value (LTV) is 90% of the deposit amount. The interest rate charged by banks is around 2-2.5% higher than interest paid on deposit by banks.

Loan against Residential Property

A loan against residential property can be availed too. The interest rate ranges between 11-15%, while the maximum tenure of the loan is generally 15 years. The loan to value is maximum 75% of the value of the property.

Loan against Shares

An individual can take loan against equity shares. The amount and tenure of the loan depends entirely on the banks. The interest rate for this type of loan ranges between 11-16%. The loan to value is a maximum of 50% of the value of the shares.


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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 


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Loan Against Assets - Financial Instruments against which you can take a Loan

Nutan Gupta

03 Nov 2016

Investments are meant to be made for long-term. However, these investments can be used to take short-term loans when need arises. Personal loan is the most widely known loan people resort to when in need. Little do they realise that one can take loan against some financial instruments too.

huhuh


Loan against Gold

As the name suggests, one can take loan against physical gold. As per the RBI rule, the loan to value (LTV) is maximum 75%. This means that if the value of your gold is Rs. 100, you are eligible for a loan of Rs. 75. The interest rate ranges from 12-17%. During an emergency, one can opt for gold loans, instead of applying for a personal loan with a bank.

Loan against Life Insurance Policy

A person can also take loan against his life insurance policy. An individual is eligible for a maximum loan of 85-90% of the surrender value. The interest rate ranges between 9-10%.

Loan against Fixed Deposit

One can also avail a loan against his fixed deposit. However, the minimum tenure of the loan is the term of fixed deposit. The maximum loan to value (LTV) is 90% of the deposit amount. The interest rate charged by banks is around 2-2.5% higher than interest paid on deposit by banks.

Loan against Residential Property

A loan against residential property can be availed too. The interest rate ranges between 11-15%, while the maximum tenure of the loan is generally 15 years. The loan to value is maximum 75% of the value of the property.

Loan against Shares

An individual can take loan against equity shares. The amount and tenure of the loan depends entirely on the banks. The interest rate for this type of loan ranges between 11-16%. The loan to value is a maximum of 50% of the value of the shares.