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|March 7, 2000||
How to get money without selling your assets
If you are in dire need of money, there are ways and means of obtaining finance on your assets without you having to dispose them off. The catch is knowing which avenue to tap depending on the amount required, collateral needed and the period for which you require the funds. Of course, you can always run to a friend or a money lender in the neighbourhood who will rip you off and if you fail to make the payments probably send some hoodlums over. Another option would be to go to your jeweller and keep your jewellery as a collateral. But he too will charge you a hefty rate of interest. If you would prefer another option, here is a basic primer for you to go by.
Mortgaging your home
This one will require you to own a home in one of the metros. And the location should be looked upon favourably by the bank. Banks like Citibank and ANZ Grindlays or a housing finance players like HDFC offer this facility. Based on the value of the property, a loan is sanctioned. But only around 35 per cent to 50 per cent of the value of the property will be given as a loan. That too, they will send their own valuators to give a rate. Your word will not do. Some offer a loan on commercial and residential property, others stick to residential. The mandatory conditions: the title deed should be in your name, the property should not be disputed, the property should be fully paid up for and the bank should approve of it's location.
Utilising a fixed deposit
The rules between banks vary. Some may keep Rs 10 or even just a rupee as one unit. Others may insist that you withdraw in multiples of 10 or 100. Though the Reserve Bank of India has done away with the mandatory levy of a penalty on breaking deposits, some banks still levy it.
You will earn interest only for the time the amount is deposited. So assume that you deposit Rs 1,00,000 for two years at an interest of 14 per cent per annum. After one year, you withdraw Rs 50,000. The Rs 50,000 withdrawn will not earn the 14 per cent but the one year rate which will be, say, 12 per cent. Though not mandatory, some banks may levy a penalty for broken deposits. If the bank wants to levy a penalty, then it could be one per cent bringing the rate of interest down to 11 per cent.
You should do the calculation and find out where you stand to gain. If you are taking the deposit for a short period of time, say a couple of months, then go for an overdraft. If it is for a longer period of time, then breaking the deposit will be wiser. Assume you have Rs 50,000 in a 24-month fixed deposit which earns you a 10 per cent rate of interest per annum. If you take an overdraft of Rs 20,000, then you will end up paying 12 per cent per annum to the bank. But the 12 per cent is only levied on the overdraft amount. The net cost to you will just be 2 per cent per annum since the entire deposit continues to earn the 10 per cent rate of interest.
A partial withdrawal is also permitted from the seventh year onwards. But take this only if you need the money for, say, purchasing a house, and you cannot replace the funds. Other small savings schemes like the post office recurring deposit, post office time deposits, post office monthly income scheme and National Savings Schemes offer premature withdrawal facilities. You can check them out to.
Besides stipulating these conditions, it is necessary that you fulfill other criteria such as being a contributor for a certain number of years and the amount permitted to be withdrawn is also subject to certain limits.
Loans against shares
On valuing the portfolio on these parameters, you will be offered a loan which is a percentage of the total value. The limit here is that banks can give only 50 per cent of the value of the portfolio as a loan subject to a maximum of Rs 10,00,000. With dematerialized shares you get a better deal. The limit goes up to Rs 20,00,000 and the bank is permitted to give you 75 per cent of the value of the portfolio. The rate of interest is stiff though, 16.5 - 17.5 per cent per annum.
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