Savings are used to purchase properties and financial instruments like shares, fixed deposit, and gold from an investment point of view. Usually, people go for a personal loan to fund their financial needs, generally emergencies. However, there are many financial instruments against which a person can take loans when needed. Below mentioned are some of the financial instruments against which loan can be taken.
| Interest Rate (p.a.) | Loan to Value (LTV) | |
| Loan against Residential Property | 11%-15% | 60%-75% |
| Loan against Shares | 11%-22% | 50% |
| Loan against Gold | 12%-17% | 75% |
| Loan against Fixed Deposit | 2%-3% higher than the fixed deposit rate | 90% |
| Loan against Life insurance policy | 9%-10% | 85%-90% |
1. Loan against Residential Property
Residential property can be used to take a loan. An investor can take a loan of 60-70% of the value of the property. The maximum tenure of the loan is 15 years and the interest charged on the loan ranges from 11%-15% p.a.
2. Loan against Shares
A person can take a loan against his investment in equity shares. The interest rate ranges from 11%-22% p.a. The tenure and value of loan sanctioned depend on the banks or NBFC. Generally, financial institutions give a loan up to 50% of the value of shares.
3. Loan against Gold
One can also take a loan against physical gold. As per the RBI guidelines, the maximum loan to value (LTV) is 75%. The loan is given for maximum 12 months and the interest rate ranges between 12%-17% p.a.
Read about the differences between personal loan and gold loan
4. Loan against Fixed Deposit
A person can also take a loan against his fixed deposit. The maximum tenure of the loan is the same as the term of the fixed deposit with the bank. The interest charge is 2%-3% higher than the interest given by the bank on the fixed deposit. The LTV is maximum 90% of the amount of the fixed deposit with the bank.
5. Loan against Life insurance policy
A person can take a loan against his life insurance policy, endowment policy. The maximum loan amount sanctioned is 85%-90% of the surrender value. Interest charged on the loan ranges between 9%-10% p.a.
Conclusion
Generally, individuals go for a personal loan when the financial needs or emergencies arise. But, an individual can also take a loan against his investment. A person looking out for a short term loan should go for a loan against shares and gold. Fixed Deposit can be used to take both short term and long term loan. Residential property helps a person to take a loan for the longer period.