The unsecured and collateral-free loans usually carry a higher interest rate and therefore it is good to opt for a loan against collateral. Those who want these secure loans can get a larger loan amount, and some of these loans may also provide for tax deductions.
While the unsecured loans are trickier and involve greater hassles, the secure/loan against collateral is provided rather easily.
Understanding The Collateral Loan
The application for a loan against collateral is backed by an asset (collateral), which can be a home, property, gold or any other kind of asset. While the borrower does not sell the asset to the firm from which he or she gets the loan, the loaner may freeze the property/take over the asset and may use it in any way it wants if the loan repayment is not done. Below are some things that can be used as collateral, when you want to seek a loan against collateral.
Bonds, Shares And Mutual Funds
You can also take a loan against collateral by using physical property. The property can be house, land or any other physical property. This is the most widely used secure loan option in India.
Loans Against Insurance Policies
One can get a loan against life insurance or any other insurance policy. What you should know is that not all policies are eligible for a loan against collateral (for instance, the term insurance policies).
The use of gold for securing loans is not new in India. Almost all banks and leading financial institution may provide to you a loan against gold.
Loan against collateral and property are less time consuming and may also come with the top-up facility. A top-up loan means that you can take an additional loan, once you have repaid a small amount of the original loan.
Most of the loans against collateral also come with the pre-closure facility, which adds to the convenience and savings of cost for a loanee/borrower.