Gold aside, these are some unconventional loan collaterals
What's the story
In India, gold has always been the go-to collateral for loans. However, as the financial landscape evolves, borrowers are now looking at unconventional options. These alternatives not only provide flexibility but also open up new avenues for securing funds. Here are five unconventional loan collateral options gaining traction in India, giving borrowers more control over their financial decisions.
Property pledge
Real estate as collateral
Real estate is a powerful asset that can be used as collateral for loans. By pledging property, borrowers can secure large amounts of money with favorable interest rates. This option is particularly useful for those who own valuable land or buildings but do not want to sell them. It also provides long-term security and the possibility of lower monthly payments compared to other forms of borrowing.
Deposit backing
Fixed deposits as security
Using fixed deposits (FDs) as collateral is becoming increasingly popular among Indian borrowers. Banks offer loans against FDs at lower interest rates than unsecured loans, since the deposit acts as security. This way, you can access funds without breaking your investment and still earn interest on your deposit.
Policy loan
Insurance policies as collateral
Insurance policies can also be pledged as collateral for loans. Many lenders accept life insurance policies with a surrender value as security. Borrowers can take loans up to a certain percentage of the policy's value without having to liquidate it. This option provides immediate liquidity while keeping the insurance coverage intact.
Farm security
Agricultural land pledge
For farmers, agricultural land can be a valuable asset to pledge against loans. This option allows them to secure funds for various purposes such as purchasing equipment or expanding their farms without selling their land. Agricultural land pledges often come with lower interest rates due to government support schemes aimed at promoting agriculture.
Stock pledge
Inventory financing options
Businesses with valuable inventory or stock can use these assets as collateral for inventory financing options. By pledging goods or products held in stock, companies can obtain working capital quickly and efficiently. This method helps maintain cash flow while ensuring that business operations continue smoothly without disruption from financial constraints.