Credit Card vs Personal Loan vs Life Insurance Policy: Want loans at 2-3%? This explainer will help
Want immediate cash? Wondering what is the better option? Often we tend to use our credit cards to meet immediate liquidity crunch, or even resort to taking personal loans. Banks, in fact, leave no stone unturned to lure salaried customers to buy either a credit card or take a personal. But is there a better option than these two? The following slides explain what you need to know:
Personal Loan interest rate: Costly option
The interest rate charged on the personal loan could be anything between 11% to 24%, or even more. You will also need a good credit score for getting a personal loan approved by your bank. Also, the personal loans are available for a fixed, short duration of 1 to 5 years. (Pixabay)
Credit card loan: High-interest rate; Bad option again
Just like a personal loan, the interest rate on credit card loan is also very high, mostly over 15% for a fixed short duration of just a few years. Moreover, if you miss paying the monthly EMIs, the total amount you end up paying to the bank may escalate beyond your imagination. (Pixabay)
Loan on Life Insurance Policy: Cheaper alternative
Getting loan on a life insurance policy is a good alternative to the credit card or personal loan. The official LIC website says, "In case of insurance, it is easy to acquire loans on the sole security of any policy that has acquired loan value. Besides, a life insurance policy is also generally accepted as security, even for a commercial loan."(Pixabay)
Loan conundrum: Credit card vs Personal Loan vs Insurance policy
On credit cards, banks often offer loans for a shorter duration at high rates. For personal loans, you need to submit documents like salary documents, housing certificates, PAN cards, etc. However, getting a loan on a life insurance policy can be possible by submitting just the policy document. (Pixabay)
Loan on Life insurance Policy: Expected interest rate
Loan on life insurance policies can be availed at easy interest rates of 9 to 10 per cent. The policy works as the guarantee. You can get loans on some Ulips but not on the term insurance policy. (Pixabay)
Loan on a life insurance policy: Hidden benefit -1!
Suppose, the return on your insurance policy is 7-8% per annum and the on the loan, you have to pay 9-10% interest. If you subtract what you are getting from what you are paying, the actual rate at which you will be paying to the insurer would be just 2-3%. (Pixabay)
Loan on Life insurance Policy: Hidden benefit -2!
While on personal loan and credit card-based loan, you have to pay back in a very short span of time, you can repay the loan on insurance policy over the entire policy term. (Pixabay)