With costs for everything increasing, it can sometimes be challenging to keep up with expenses. There are many banks and lenders that offer unsecured loans and overdraft facility for people in need. However, not everybody is eligible for a preapproved Personal Loan.
While it is most recommend to opt for a trusted lender product like an SBI Personal loan, your credit score might render you ineligible for the same. Being denied a loan can put you in a pickle when you are in need of one.
If you have also been denied a personal loan, here are some alternatives you can consider:
- Gold Loan
One of the most popular substitutes to Personal Loans could be Gold Loans. In our country, gold has always been treated as a necessary commodity across cultures. If you have idle gold available with you, then you can consider procuring a loan against the yellow metal. Another reason why one would prefer a Gold Loan over a reputed bank loan like PNB Personal Loan is because Gold Loan Interest Rates are comparatively lower.
To opt for this loan, you would need to pledge gold coins or your gold ornaments. There are many gold loan companies in India, such as Manappuram Gold or Muthoot Finance, which offer you fast Gold Loan.
The interest rate is evaluated based upon the amount of loan that you apply for against the value of the gold that you pledge. Let’s understand this better with the help of an example:
For instance, if a loan is applied for 90 percent to 100 percent of the gold value, then approximately 13 percent to 15 percent interest rate is levied on the loans. Hence, ensure that you study two to three options to get the best deal.
- Loan Against Insurance PolicyWe understand that you want to go for a trusted name when sourcing funds.
Getting a loan against your current insurance policies from a bank also serves as a good alternative to Personal Loan rejection. You can choose your insurance policy to put up as a guarantee against your loan. Using your policy as collateral you can approach a bank of your choice.Most banks require a safe guarantee to ensure that the amount they lend comes back to them; even if something happens to the borrower. So, you can put up your insurance policy as collateral and get the loan amount that you need.
- Loan Against Fixed DepositWe have often been told that we should always have a saving to fall back on. One of the best ways to save up is to invest in a Fixed Deposit. While one can break a Fixed Deposit in times of urgent needs, another ideal option to use it is by taking a loan against it. You must have heard of the term- overdraft while looking for alternatives of a Personal Loan. An Overdraft on a Fixed Deposit is the credit limit you can advance against your FD. The interest is levied only on the amount you use.
Typically, a bank lends nearly 75 percent to 85 percent of the entire Fixed Deposit amount. The interest which is charged on these loans is only one to two percent higher than the interest rate levied on the FD. So, if you have a Fixed Deposit in your name, then use it as an alternative.
- Loan against PropertyWhen you need a hefty sum from your bank and denied a loan, you can apply for a loan against an immovable property like a plot of land, office space, or even your home. Pledging a tangible asset like the property, you can conveniently avail 50-60% of the market value of the property as a secured loan.However, I strongly recommend going for a third-party valuation to ensure that you get the right value. Most lending institutes can undervalue the assets while giving you a loan. The third valuation is done to ensure that you are getting the right amount of loan against the property you put up.
- Loan against investmentsAn individual can opt for reimbursement of their mutual funds when in dire need of funds. However, if you want to keep the investments intact and do not wish to liquidate them, then use them as collateral for taking a loan. This is also an excellent alternative to a Personal Loan. However, you would need to remember that not all types of mutual funds or shares can be put up for taking a loan. Most lending entities have a list of approved shares and mutual funds against which they provide loans to the borrower, so it is best to ensure that the investment you are nominating as collateral will be accepted.
- Loan from your EmployerFor people looking for alternatives to Personal Loans, approaching employer is also a good idea. You can ask your employer to lend you some money and take it back in the form of adjustments against your salary. You can opt for a cash advance or figure out a repayment measure that works for both you and your employer.
Each of these aforementioned options are good alternatives to consider in case your Personal Loan application does not work out. They will help you secure urgent funds without any delay.