Life is unexpected and a financial crisis can happen at any time. People keep aside a part of their earned money as savings to deal with such financial crises. However, when an emergency arises, people often look for different sources from which they can borrow a loan, or mortgage their assets. However, there is one easier and simpler option too. Buying a loan against FD can get you instant liquid cash for managing such situations. All you need to do is have an FD, and the company or bank with which you have it, will provide you a loan against 70-90% of your total principal amount deposited in FD.
Great Option for Small Loans
Loan against FD is a great option for dealing with short-term crisis or when you want small amounts of money. FD can come to your rescue before they get matured by providing a loan/overdraft facility. Companies offers loan against FD facility by providing its customers a loan of 60% of the principal amount in the case of non-cumulative FD. Whereas, in the case of a cumulative FD it amounts up to 75% of the principal amount.
Less Interest Rates
A great advantage these loans have over other loans is they have much lesser interest rates than other loans. The rates of interest on these loans is charged only from 2% to 3% more than the interest rate on your FD. NBFCs offers interest on FD at 7.60%, and the loan interest rates amounts up to 2% above that rate. Normal loans are charged between 9% to 15%, hence, a loan against FD is a much better and cheaper option when looking for small amounts of loans.
Minimum Documentation and No Costs
The duration for which the loan is taken is generally for the same time period in which the FD gets matured. Sometimes it can be less than the duration of FD, but can never be more than that. While taking a loan against FD, you won’t be able to break it to get your principal amount before it gets matured. You cannot withdraw any money from your FD till you would repay the whole amount of loan in full. NBFCs have a very simple process of providing the loan with a single page documentation. There are no processing fees or any other costs, and you get the disbursal of amount in your bank within 24 hours.
Prepayment and Foreclosure
Foreclosure is the procedure of foreclosing your loan by repaying the amount of loan before the duration of the loan ends. Unlike other loans, loan against FD doesn’t charge you any such charges or fees. This gives you the flexibility of paying off the loan amount whenever you want to. Company offers flexible repayment options for these loans which is within the tenure of the FD, which initiates after the 90 days from which the FD has started.
An important thing to be noted is – the time when you are applying for the loan. If you are applying for the loan when the maturity date of the FD is near, the maximum duration you can get to pay the loan off is limited to the time remaining till the maturity of the FD. Due to this, you might not have many months and you would have to pay higher EMIs to pay it off. So, ensure that you check which FD you are applying for loan against, if you have multiple FDs of short durations. Look for the one whose maturity date is farthest by analysing how much EMIs you would be able to pay.
4 Questions You Must Ask Your Financial Adviser
Money is one of the essential things to survive. But, it is not only about having enough money that makes life smooth because if you don’t know the right way to manage it, then things might get worse.
So, if you earn well, have a lot of money and don’t have a clear idea about managing it properly, then seeking help from a reliable financial adviser is a great idea. However, you must know that all financial advisers do not work in your best interest, and some may even try to fill their pockets by selling commission-based products instead of giving you the right investment advice.
If you are unsure about how to deal with a financial adviser in Blackpool or wherever you live, then here are a few questions to ask them before investing your money.
1. How Will They Invest Your Money?
It may come as a surprise to you, but many people don’t ask their financial advisers about how they are going to invest their money. Well, you must always start the process of your financial protection by asking this very question because it will provide you with a clear idea about how your portfolio is going to be managed.
Ask your financial adviser about the strategies they are going to implement and at the same time, you may ask for the explanation of the chosen strategies.
2. What Is Their Qualification?
You must always ask your financial adviser about their qualifications and what all certificates do they hold. Many firms ask the financial advisers to either pay a certain amount as fee or take a course. Now, you must avoid such advisers and look for either a certified financial planner and public accountant, or a chartered financial analyst.
Besides the qualifications, it is always good to go with the advisers who hold some experience in the field. Also, look into their speciality and the number of clients they deal in a year.
3. How Much Do They Charge?
It is always a good idea to enquire about how much they will charge you for seeking their services. If your adviser is paid a fee and does not get a commission on products, then they will work in your best interest instead of acting like a mere salesperson.
4. What Are The Available Options For Liquid Savings?
Many investors like to start their investment journey by focusing on the liquid savings fund and seeking help from expert advisers. Well, it is the first act of defence for making a personal investment and the main reason behind seeking guidance from a professional adviser.
So, never hesitate to ask your adviser questions regarding the reliable options available for a liquid investment.
The Final Say
When you look for a baby sitter for your little munchkin, you just don’t end up picking the first person you interview. Right? You go through the entire process of interviewing different baby sitters and then choose the one you find the best.
Well, that’s how it has to be with finding a financial adviser because you just can’t trust any random person with your money. So, don’t feel afraid to talk to different advisers, ask your questions to them because doing this will help you save your investment in the best possible way.