Would you like to borrow money? If so, it’s possible you are scouring the internet for possible solutions, and you may have come across terms such as unsecured and secured loans. But what are they and how are they any different from each other? The line that separates the two is often hazy and unclear, which is why today we set out to define what personal loans are, the options you have for quick capital against securities, and why you’ll be best served especially with loans against shares and mutual funds. Let’s get cracking:
About Secured Loan Options
To best know about secured loans, let’s first talk about unsecured loans. The latter are types of loans that you can take that don’t require you, the borrower, to provide any collateral or security for your loan.
But lenders of unsecured loans won’t just take your word that you’re good for it. Because these types of loans are usually very high risk for lenders, you’ll find that they are only given out to a small group of qualified people with high creditworthiness.
Secured loan options meanwhile are the exact opposite. You provide collateral for the loan, then you can take out a loan size, which is usually equivalent to a percentage of the value of the collateral or security that you’re offering to your lender. Some of the assets or possessions that you can offer as collateral include:
- Mutual fund units
- Shareholdings
- Collectibles and valuables
- Vehicles
- Real estate, etc.
As a result of collateral, secured loans have a lower risk for the lender, so the eligibility criteria are usually relaxed and have fewer requirements compared to unsecured loans
Loan against shares
In this scheme, your shareholdings are the collateral for your loan, and you can get up to 65% of the value of your units as the loan size amount. With more and more people investing in shares, these types of secured loans are a great way for investments to achieve liquidity without actually liquidating.
Shares offered up as collateral are usually protected by a waiver, which means the borrower, although he or she retains full ownership, cannot sell or redeem pledged shares during this period.
However, you can’t use any share units to take a loan against shares in India. You need to have approved shareholdings as per the lender’s requirements. Visit www.abhiloans.com to check if you have eligible share units.
Loan against mutual funds
There are several types of secured loan options, and one of the best ones is a loan against mutual funds. In this arrangement, mutual fund units act as security for your loan, and in exchange, you get a percentage of your units’ value as your loan amount.
Depending on who you turn to LTVs can vary wildly, but with trusted lenders like Abhi Loans, you can get a really good LTV on your quick loan against securities of up to 75%. In other words, you can get up to three-quarters of the value of your mutual funds’ units.
Why Choose a loan against shares & MF?
Loans against shares have the upper hand on personal loans, credit card loans, and many types of loans in the following ways:
1) Lower interest rates
Personal loans can reach up to 37% interest rates, especially if you have a poor credit score, making it very tough to pay back a loan. Because a loan against shares and mutual funds doesn’t rely on credit history, however, they tend to have lower interest rates. At Abhi Loans, that varies as follows:
- 13% interest rate for EMI-based loans, where you pay the principal plus monthly interest
- 16% interest rate for overdraft loans, where borrowers are required to pay only the monthly interest amount
As you can see, you can access loan against securities at cheap rates because they have interest rates that are up to just a third of the interest rate that you’ll pay with some personal loan providers.
2) Loan disbursal within 24 hours
Loans can take anywhere between 3-5 days to process, sometimes even hitting 14 business days with some banks. For some who offer same-day disbursal, you’ll usually have to pay an extra fee or higher interest rates to access.
With a loan against mutual funds or shares from Abhi Loans, you can get your loan disbursed directly into your bank account in just 24 hours or 1 business day, post-closure.
3) No prepayment charges
Credit card loans and personal loans have strict measures in place when it comes to prepayment. Because they want to keep earning high interest on borrowers for longer periods, they levy 2%, sometimes even thrice as much, in prepayment charges with reference to the remaining loan amount as at the time of the prepayment.
With NBFCs like Abhi Loans, meanwhile, borrowers can enjoy:
- Minimum prepayment period of ZERO months
- NIL prepayment charges
- No additional or hidden fees for repaying early
So you can repay your loan at any time of your ability and convenience.
4) Accessible to bad credit profiles
Unlike banks, credit cards, and other types of loans which vehemently consider credit trustworthiness and won’t budge on their stance whatsoever, loans against shares and mutual funds providers like Abhi Loans are the exact opposite. There’s no need for:
- Unnecessary background checks
- Employee history verification
- Credit card background checks
As a result, there is no marginalization or turning down of borrowers due to them being high risk. Therefore, these types of secured loans become available to anyone who needs them.
Last but not least, with fully digital loans against mutual funds and shares, you can apply from home for quick loan processing. This contactless system free of manual systems ensures easy documentation and fast disbursal.
Bottomline
Secured loans are an excellent way to go if you want quick cash and don’t want to be bogged down by high-interest rates. In particular, the best way to go is to get a quick loan against shares and mutual funds, as they are open for all, have flexible loan ranges, and boast really low EMIs of between 1.3 to 1.5% only. What’s more, you can pay back just the loan amount you’ve used if you decided to refund the loan early. To apply for your loan against securities, visit www.abhiloans.com today.
