Fd vs gold vs stock loan: When suddenly money is required, taking a loan is the easiest way. These loans are fast processing, get money immediately and help to meet your short-term expenses. Today there are many types of loan products in the market. There are some unseeded loans that are found on the basis of your credit score.
But if the credit score is not good or you are looking for some more options, then a loan can be taken in lieu of asset. Such as fixed deposits (FD), gold or share. Each type of asset-based loan comes with different structure and risk. This can be beneficial according to your different financial needs.
Loan safest on fd
The loan received in lieu of FD is considered the safest. It has a fixed interest rate and the risk is very low as your deposit keeps increasing. People with poor credit history can also take this loan. Typically, banks give loans up to 90% of FD amounts.
Interest Rate: It is about 1% higher than the bank’s FD rate. For example, if the State Bank of India pays 6.5% interest on FD, it will charge 7.5% on the loan.
Loan pledging gold
Gold loan is also an easily available option. Especially, if you have jewelery or gold coins. In this, the loan is usually up to 75% of the value of gold.
Interest Rate: About 9% starts at annually. If there is a high demand for gold in the market, then the interest rate can be even less because the risk of the bank decreases.
Loan on share or mutual fund
If you have invested in share, mutual funds or insurance, then a loan can also be taken with their help. But it has high risk because the stock market is unstable. In this, a maximum of 50% loan of the value of shares can be found.
Interest Rate: The interest rate in loan on share and mutual funds can be 11% or more. For example, SBI takes 11.50% interest for loans on mutual fund units.
Which loan to choose?
While taking a loan, it is most important that you keep your repayment capacity in mind. Do not take a loan just to meet short term needs that spoil your long term financial health.
If you want to avoid risk then FD or gold is best. But if you have investment and need a quick fund, a loan on a share or mutual fund is also an option. However, it will need to be a little cautious.
Also read: Explainer: Home, Car, Gold, Personal … How many types of loans are there, what is the difference between them?