There are financing firms in India that provide credit without any guarantee. But this type of service can prove to be trickier, and then the ones connected with an asset. For this reason, borrowers should opt for alternatives like a loan against collateral.
We understand that not everyone is a veteran in the world of financing services. Thus, there might be a few of you, who don’t know about the concept of a loan against collateral. Hence, we have created this particular article.
This article aims to highlight information about loan against collateral. Besides, it will even give you an idea of all the advantages related to this financing service.
What is collateral?
There are two ways of borrowing a loan, available in India. One is with collateral, whereas, the other is without collateral. The term collateral stands for the asset or guarantees that you attach along with your application.
In other words, while borrowing a loan, an individual will exchange his collateral or asset with the financing firm. It will allow him to get a loan against collateral to fulfill all his financial requirements.
The facility of a loan against collateral has been designed for borrowers, who do not want to sell their investments. This gives them an opportunity to enjoy risk-free transactions, which are also flexible enough.
What can be used as collateral?
In case you have a land or house, then you can easily borrow a loan against collateral with the same. Such properties are the most common type of investment options that Indians use.
Shares and bonds
The next asset that can be used as collateral is shares or bonds. By taking a loan against bonds, you will not have to compromise on your future returns. It will still allow you to enjoy financial services or instant liquidity.
Another investment option that is ideal for acquiring a loan against collateral is insurance policies. But you need to make sure, that your chosen scheme is both an investment as well as an insurance cover.
Collecting gold jewelry is a major part of Indian traditions. Thus, this particular investment can also be used to borrow a loan against collateral. Moreover, you will be able to acquire a substantial amount of your gold value as a loan.
What are the advantages of a loan against collateral?
1. Less time-consuming
The biggest advantage of a loan against collateral is that it is less time-consuming. It means it is ideal for borrowers who are looking to generate immediate funds. In other options, loan processing might take up to 30 days. But with a loan against collateral, it can be received within a few days itself.
2. Top-up facility
The next advantage that most borrowers don’t know about is the top-up facility. Once you start paying back your loan against collateral, you will be able to borrow an additional amount. It is known as a top-up service, which is provided on your current loan.
3. Pre-closure facility
Traditional finance generating options would require you to pay a fee for making prepayments on loan. But in the case of a loan against collateral, you can utilize the pre-closure facility easily. It allows you to get rid of all the liabilities in advance.
Leading NBFCs and financial institutions offer best offers when you opt to take a loan against collateral. Apart from the above options mentioned, there are various other options which can you use like mutual funds, stocks, car and many more. You just have to compare the different parameters set by lenders like loan amount, eligibility criteria and application process.