Cash-strapped? Here are four secured loan options you can consider

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The Covid-19 pandemic has upended almost everyone’s financial plans. For those in need of quick cash, secured loans can be a way out. As compared to collateral loans, secured loans are easier to obtain, have a lower interest rate, and have fewer charges. Most secured loans can be applied online with very few exceptions.

Loan against securities

Loans against securities allow you to use your investments as collateral for borrowing funds to meet personal or business needs. You can pledge investments like shares, mutual funds, bonds, ETFs,  NSC, life insurance policies, KVPs, etc., to get a quick loan. The lender may grant you a loan of 70% on these market investment tools according to their assessment of the value of the pledged securities.

“Instead of liquidating your securities for cash, you can use them to get security, thus increasing the growth of your investment. As during the loan term, your securities will continue to earn interest, dividends, and bonuses,” said Harshvardhan Roongta of Roongta Securities. Loan borrowers have to pay interest each month and can pay the principal amount according to their cash flow. However, borrowers will have to meet the loan-to-value (LTV)ratio requirements if the value of pledged securities declines.

Gold loan

Gold loan is one of the most commonly used secured loan options in India. These loans are the quickest to be approved and are typically disbursed on the same day that the application is received. Your gold jewelry or gold coins (with a minimum purity of 18 carats) can be used for security against your loan.

“A gold loan usually has a repayment period of three years. Some lenders may offer a longer repayment period of four to five years. Banks and financial institutions usually offer 75% of the gold’s current market value,” said Satyam Kumar, CEO of Loan Tap. Many lenders offer gold loans that have flexible repayment terms.

Top-up loan

A top-up loan is only available if you already have a home loan with a good repayment history. Here, your LTV ratio is the most important factor. Adding a top-up loan must not increase the outstanding amount of the loan beyond the LTV range, at which the original loan was issued. So, if you have been approved for a loan of 80% of your property value, your outstanding principal, including the top-up loan, cannot exceed 80%.

Top-up loans take 1-2 weeks to process. However, some lenders have also started offering pre-approved top-up home loans to existing borrowers with same-day disbursement.

Loan against property

You can use your properties as security for a loan if you’re looking for a long-term loan. A residence, commercial or industrial property is pledged as collateral for a loan against properties, and the amount could range from 50% to 70% of the current market value. Repayment periods here can vary from 15 to 20 years, with some lenders offering longer terms. It may not be the best option for those in search of quick funds because the process under this may take 2-3 weeks.