Alternatives to Personal Loans for Dealing with Cash Crises
Life, being full of unpredictable events, makes it extremely challenging for a person to stay unharmed when it comes to money matters. At times, people might feel short of cash and be in dire need of finances to deal with urgent situations. During such pressing situations, when they cannot arrange enough funds from the existing means, there is a majority of people who go with the flow and opt to deal with their needs through a personal loan.
Normally, personal loans seem to be the easiest and the only solution as compared to the other modes of personal financing. It can also be a tempting choice as a personal loan can be acquired according to the personal monetary requirements and with lesser paperwork, quick processing and no collateral security. With such benefits, they seem to be the near perfect solution for all the urgent monetary needs.
However, amid the attraction of these delights lie the raging rates of interest. Normally, the banks charge interest on personal loan anywhere between 14-to-25% from the borrowers. As far as the interest rates are considered, personal loans are only second to costly cash advances taken through credit card, which carry an interest rate up to 50% per annum effectively. With such high rates of interest, it is not an intelligent decision to get stuck in the vicious debt cycle of banks offering personal loans.
Given the interest and other related drawbacks, borrowers are often forced to look for healthy alternatives to personal loans for dealing with the fiscal crisis. Thanks to the ever-widening operational base of the present day financial market, there are a lot of other cheaper alternatives available in the market that can serve the purpose of raising cash on an immediate basis.
Fixed Deposit Loan
When one is in immediate need of money, breaking the fixed deposit account can be the first thing that comes to mind. However, it is not a wise decision to use the money saved for the post retirement years to deal with the present needs. This is where loan against the fixed deposit accounts proves to be a life saver. Normally, the banks provide a loan up to 90% of the fixed deposit amount. As far as the interest rates are concerned, the borrowers are charged at a rate 1-2% higher than what a person is entitled to receive on the fixed deposits. One of the biggest advantages of taking a loan against the fixed deposits is that the person gets to earn normal interest on the deposit during the tenure of the loan as well.
Gold Loan
Apart from enhancing the overall appearance of a person, gold can certainly prove to be an asset that acts as a saviour during a financial crisis. Though it is relatively difficult and even not advisable to invest in gold at this point of time when the rates are enjoying a trip to seven skies, the gold already in possession can always help to ease down the situation. There are several banks and financial institutions that provide loan against gold, depending upon its weight, level of purity and the present day market value.
Loan against Shares
There are some financial institutions and banks that willingly offer loans against shares that the borrowers hold from any specific, well-reputed company. This doesn’t necessarily mean that the one can get loan against just any kind of shares. The lending banks do have list of approved scripts as determined by them only against which a person can obtain a loan.The amount of loan granted by a bank purely depends upon the current valuation of the shares and the ability of the borrower to repay the loan within the stipulated time period.
Loan by Mortgaging Property
With the realty rates skyrocketing with each passing day, banks are more than happy to provide a loan against a real estate property. Though people might think of selling their house, office space or a piece of land in lieu of a huge amount of easy and instant cash, it is indeed the most challenging and irrational thing to do. Shopping for banks that provide the best amount of loan against a real estate property is a much better option to unlock the potential of the asset.
Loan against PPF
Taking a loan from the PPF account can be considered the best alternative to acquiring personal loans. Loan facility is available between 3rd financial year and 5th financial year of the account. The rate of interest charged on loan taken by the subscriber will be 2% p.a. above the prevailing interest rate applicable on PPF.
Considering the aforementioned options might open new doors to come out of a financial difficulty in an easy and less-expensive manner. Evaluating the needs and overall financial position before choosing an option becomes imperative, because it might have a direct impact on the final monetary plan.
