Your money: You don’t get a personal loan? Explore other options

Gold loans help borrowers alleviate their financial needs by monetizing their unused gold.

By Gaurav Aggarwal

Personal loan is one of the most preferred loan options for meeting urgent financial needs as it requires minimal paperwork, quick disbursement, and no restrictions on the end use of funds. However, the unsecured nature of personal loans prompts lenders to exercise caution when evaluating loan applications, which often leads to rejection of loan applications.

Here are some alternative loan options borrowers can consider if their personal loan application is rejected:

Loan Against Property (LAP)
The loan against the property is disbursed against the guarantee of commercial, industrial or residential land. Due to the secured nature of loans against property, their interest rate is lower than that of unsecured loan options. The LAP interest rate is 7.95% to 13.10% per annum and the loan amount can reach 70% of the market value of the property. The maximum loan term can be up to 15 years, with some lenders offering a longer term of up to 20 years. Therefore, those who need a larger loan amount and / or a longer duration for small NDEs can opt for the LAP. On the other hand, it can take 2-3 weeks for a loan to be disbursed against real estate due to a complicated approval process.

Gold loan
Gold loans help borrowers alleviate their financial needs by monetizing their unused gold. Lenders typically disburse gold loans on the same day they receive the loan application. However, the maximum term for gold loans is between one and three years. Some lenders offer a longer loan term of up to five years. The interest rate on gold loans is 7% -29%.

The amount of the loan depends mainly on the valuation of the gold deposited as collateral and the Loan-To-Value (LTV) ratio sanctioned by the lender. The interest rates for gold loans are much lower than unsecured loans due to the low credit risk involved.

Complementary real estate loan
Reload Home Loans can only be used by existing borrowers with a good repayment history. The eligible loan amount is usually the difference between the outstanding mortgage amount and the original loan amount sanctioned by the lender. The term of the additional home loan cannot exceed the residual term of the original home loan, with lenders capping it at 15 years. The interest rates for top-up home loans are generally the same or a little higher than those charged for the underlying home loans.

While the processing of top-up home loan applications typically takes 1 to 2 weeks, a few lenders offer pre-approved top-up home loans to existing home loan borrowers with a same-day loan disbursement.

Securities loan
Securities Lending (LAS) is offered against bonds, stocks, ETFs, mutual funds, NSCs, life insurance policies, KVPs, etc. This facility allows investors to monetize their existing investment without compromising critical financial goals. The borrower will continue to receive credit for dividends, premiums, interest, etc., on the pledged collateral. The loan amount depends on the type of collateral offered as collateral and the LTV ratio assigned by the lender for the pledged securities.

LAS is generally offered as an overdraft facility with a sanctioned credit limit. The borrower is free to draw all of the sanctioned limit or part of it according to his monetary requirement. The interest component of the securities loan is charged on the basis of the amount drawn until it is repaid, and can range from 9.05% to 18%.

The author is Director, Unsecured Loans,

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