Refinancing options when a Home Loan isn’t enough
by Mashum Mollah Loans & Credit 28 May 2016
Planning to give up on buying a beautiful villa because you’re not eligible for a higher Home Loan amount? Don’t lose hope, because there are other financing options that will help you out. Applying for a Home Loan isn’t the only way you can buy a property when you’re short on funds. When the Home Loan alone is insufficient to finance the property, you can raise the remaining funds by opting for another loan.
Let’s take a look at the loans that can back a Home Loan and make buying that much-desired property a reality:
This loan is undoubtedly one of the most popular financing options available in the market. A lot of financial institutions offer a Personal Loan that comes with a shorter tenure and a floating rate of interest. The amount of loan you’re eligible for would depend on your credit score and repaying capability.
The higher the credit score, the higher the loan amount you’ll be sanctioned. Maintain an above-average credit score by paying your existing debts on time and avoiding any credit defaults. If your Home Loan has been sanctioned first, it can affect your eligibility for a Personal Loan. So, to ensure that you get the best deal on both your personal and Home Loan, apply for a Personal Loan first.
Unlike the Home Loan, required documents for a Personal Loan are minimal. Most lending institutions adopt minimal paperwork and an easy disbursal process, meaning your Personal Loan will be approved and disbursed within a short time.
Gold is one of the most popular assets in average Indian households. Liquidating your gold when you’re in need of urgent funding is another effective and safe option. With an increase in the stability of gold rates, more lenders are open towards offering flexible rates on such loans. The secured nature of this loan gives you a lower interest rate when compared to other loans.
The gold to value ratio for this type of loan is, generally, between 75 and 80% of the value of the gold you pledge. And, the tenure generally lies between 12-36 months.
Loan Against Fixed Deposit:
A fixed deposit is one of the most common ways of saving up money. When you don’t have any other asset to put up as collateral, you can make use of a fixed deposit to help you out. Personal Loans, when secured with an FD, come with an interest rate of 2-2.5% of the FD’s rate of interest.
Financial institutions offer overdraft facilities when you go for a Loan against FD, which is set at 60-70% of the FD value.
Read also: Loan types and How does it work?
Loan against PPF:
Public Provident Fund or PPF is an excellent instrument for long-term savings. The amount deposited under PPF also qualifies for tax benefits. If you’ve been investing in a PPF for a minimum period of three years, then it’s also eligible to be used as collateral against a loan.
The amount eligible for this type of loan is restricted to 25% of the balance at the end of the second year. You can’t avail a loan against PPF if it’s in the 7th year, as it then qualifies for partial payment.
The interest rate on this type of loan is generally 1-2% of the interest charged on the PPF account.
Loan against securities:
A Loan against securities is an alternative you can rely on if you don’t want to liquidate your physical assets. Assets like equity shares, equity mutual funds, non-convertible debentures, gold deposit certificates, and T-Bills can be used as security to avail of this loan. If you’ve invested in 100% debt mutual funds, you are eligible for a higher loan amount.
The best part about using these securities as collateral is that you’re still entitled to all the bonuses and dividends that would arise from the securities. You also get the flexibility of switching your securities depending upon a particular stock’s market performance.
With minimal documentation and easy disbursement process, this is one of the easiest ways of getting some quick cash.
These are some of the loans which can be availed to complement your Home Loan. However, before settling for one, research the interest rates offered by financial institutions across the country. Check your eligibility, repaying capability, and the EMIs you’d incur on the loan by using an online calculator. Keep all the documentation in order and read the loan letter thoroughly before signing up. Also, don’t forget to compare Home Loan interest rates available in the market before you zero in on one.
Read also: 10 Home Loan Tips
With the right loan and a sound financial strategy, you’ll definitely get the house of your dreams.