Is there an investment opportunity in PSP Projects shares?

Your debt can turn vicious if ignored for longer than usual. While there are a series of financial products available in the market that claim to provide temporary relief from one’s debt, more often than not, they turn out to be mere traps. Being aware of the best options available and seeking expert suggestions can go a long way in fixing your financial situation.

In a recent episode of Money9 Helpline, viewers had similar queries in relation to the constant spiraling of their debt situation.

“My family of 5 just recovered from Covid and I exhausted the credit card limit in this period. The credit card interest rate is 38%. Should I apply for a personal loan? Please suggest,” Priyanka Jain asked.

Credit card

Credit cards are rightly termed as double-edged swords. While they may be really helpful during an emergency, it takes no time for them to become a hanging sword in case of delayed repayments.

“I would suggest you meet your credit card payments. It has a high interest rate of 38% on the outstanding balance. A credit card outstanding interest charge is one of the costliest debts. So you should definitely apply for a personal loan. The personal loan will charge an interest of 11 to 13%, so it will significantly reduce your current interest rates,” Raj Khosla, founder of My Money Mantra, suggested.

A personal loan is a time-bound loan and you will be able to pay in EMIs. Also, you must clear your credit card dues so that your credit score remains intact, he added further.

Gold loan

Another emergency savior is a gold loan. It is like the loan against shares, as it depends upon external forces like market prices of gold. It has a loan to value ratio.

Suresh Khandelwal, a Money9 Helpline caller, asked in this regard, “I have been doing dry fruits business for many years. I took a gold loan during the last lockdown. I am told that if the gold prices drop and the margin is affected then the bank will sell my gold if I don’t pay back the loan or I have to deposit more gold.

“So if gold prices fall, the bank will give you an option to either deposit more gold or money to suffice for the loss. If you can’t afford either, go for personal loan over draft (OD) facility. The two main suppliers of this loan are Bajaj Finserve and Fullerton India. Now the money from the OD can be used during such emergencies to save your gold,” Khosla explained.

Property loan during Covid-19

Another Money9 Helpline viewer, Roopak Agarwal had a query about taking a new property loan during the pandemic.

“I already have one home, should I plan for a new property with a loan considering the Covid situation?” he asked.

It is always very tempting to buy a new property, as home loan rates are low and property rates are also low. However, according to Khosla, “Under the Covid-19 situation, I would not advise for it, since you already have a home and you must be considering a new home for rental income. In Covid times even rental income is under stress.”