Looking for cheaper loans? Opt for loan against insurance, mutual funds or security over personal loan

Loan against insurance is a better option as it charges around 9 to 9.5 per cent of the interest rate, which is almost half the interest rate levied under a personal loan.

If a person is not in a hurry, then he or she should go for a loan against insurance or security else personal loan is the option people usually exercise. Photo: Pixabay

Taking a loan is common among the salaried middle class. But, it has been found that due to lack of awareness people opt for a loan in a hurry that leads to higher EMIs. Tax and investment experts have their own view in this regard. They say that in the last few years personal loans have become easy access to finance for middle class even though they come with a higher rate of interest. Instead, one can go for a loan against insurance or loan against their mutual funds or securities which charges almost half the interest rate of the personal loan for the same period.

Speaking on the matter Jitendra Sonalki, a SEBI registered investment expert told Zee Business online, "Loan against insurance is most convenient as it charges around 9 to 9.5 per cent of the interest rate which is almost half of the interest rate levied under a personal loan." Solanki said that in case of a personal loan if the company with which the loan applicant is associated with is not of a good repute, the applicant has to pay some additional around 1 per cent interest as it is a non-secured loan.

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"Loan against insurance and loan against securities or mutual funds are secured. That's why the interest rate is lower. In fact, it is lack of awareness among the loan applicants that leads them to the personal loan rather these secured loan options," said Solanki.

Elaborating upon the circumstances when a loan applicant can opt for personal loan over loan against insurance, security Gaurav Gupta, Co-Founder and CEO, Myloancare.in said, "Personal Loan wins our vote when it comes to arranging funds for meeting urgent needs as the loan amount granted is a function of the borrower’s income and repayment capacity and not restricted by the value of the insurance policy. It (personal loan) also saves you the discomfort of assigning your future life savings as collateral to a lender."

"It takes time for loan disbursal if it's a loan against insurance or security while in case of a personal loan, the loan is disbursed at a faster rate that attracts a loan applicant towards the personal loan," said Jitendra Solanki. He said that if a person is not in a hurry, then he or she should go for a loan against insurance or security else personal loan is the option people usually exercise.

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Personal Finance mutual funds