COVID-19 pandemic has pushed people to learn new ways of earning and savings as well as planning finances. Some people may be facing a liquidity shortage at present, but there are options that can be considered to provide much-needed additional money.
However, all of these options have their own sets of pros and cons, which must be understood before opting for them.
Loans against cars
This option could be explored by the ones having cards.
Under this, users can pledge the car so that they can get a loan to meet the immediate financial requirements. There is no requirement of an income document to get a loan against the car. Also, the disbursal happens quickly into the bank account.
Overdraft is a credit facility linked to a bank account. In this, a user can use or withdraw money from a bank account even if there is no money left in the account. This feature is provided by almost every financial institution, including banks and NBFCs.
An overdraft facility can be sanctioned against the house, fixed deposits and insurance policies as collateral. It is also possible to attain an overdraft facility through equity. There is no interest-free period on overdrafts. Hence, interest and fees are charged on overdraft from the day customers use the limit
For liquidity, people can also take loans against gold, which comes at a lower interest rate than personal loans. However, experts ask borrowers to ensure that they do not borrow excessively in case of gold loans. There are several lenders offering gold loans.
Loans against insurance
Loans against insurance policies can be availed in case one pledges specific traditional policies like money back and endowment policies. Such plans have a life cover option in addition to the saving factor which makes them acceptable to banks. The repayment procedure and interest rates differ based on the lender from whom the policyholder wishes to take the loan.
Line of credit
In the case of the line of credit, customers can borrow up to the maximum limit, repay the funds and borrow again as needed. According to Gaurav Chopra, CEO and founder, IndiaLends, this avenue provides built-in flexibility on when and how much to borrow and how and when to repay.
Loans against credit cards
Pre-approved loans against credit cards can help in quick processing and disbursal of loans. Credit cardholders having a good repayment history can consider taking it.
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