Hyderabad: Salaries are being cut, incomes are dropping but, expenses keep rising. With the COVID-19 outbreak showing no signs of going away soon, the financial ill-effects could linger on for quite some time.
The journey can be longer than you think, and you may face a situation eventually when you are short of cash. When people face financial crunch, they need temporary money to tide over the situation.
Selling something at the right price is difficult, plus in a distress sale the buyer always gets a poor price. What if you could unlock value from assets you own without selling them? Here are a few ideas that can help you get started.
Raise cash from mutual funds, stocks, bonds without selling them
Stocks, bonds and mutual funds are integral to your long-term financial goals. But what if you could realise some cash from them without liquidating them? Yes, it's possible.
Most banks allow retail customers to get loans of up to Rs 1 crore instantaneously by pledging their holdings in debt and equity schemes of mutual funds, stocks and bonds. NBFCs can give upto Rs 20 crore.
Raise cash from mutual funds, stocks, bonds without selling them Minimum loan amount starts from Rs 50,000. The loan amount can be between 50-80% of the pledged security. These days, banks and some financial institutions have set up fully digital systems.
The fully digital and paperless facility empowers the customers to avail loans against securities. Without physically visiting the financial institution and without submitting physical documents, in a matter of a few minutes you can be on your way to raise cash.
These come handy to customers in the current pandemic scenario as it empowers them to take care of their liquidity by pledging assets, without stepping out of the comfort of their homes.
Read more:U, V, W, L, Z or swoosh? Various shapes of economic recovery explained
The interest is calculated only on the amount of the loan actually used by you. Check with the lender on their comprehensive approved list of shares, mutual funds, and bonds which are accepted as collateral for loan.
If you have small-saving schemes like NSC, KVP or specialized gold deposit certificates, those too can be pledged. Loan tenure is usually 1 year and the interest rate starts from 8-10% depending on the institution and borrower.
Make money by leasing out space at your home for e-commerce
The post-COVID world will likely be tough for lodging or homestays. So, even if you have such space at your home, business could be tough for a while. But, there is always someone looking to hire your free space.
Top e-commerce companies these days offer plans for local entrepreneurs, who not only know their neighbourhoods like the back of their hands, but also enjoy the goodwill of their communities they reside in. These entrepreneurs can become local point-person for the delivery and receipt of products within small neighbourhoods.
Make money by leasing out space at your home for e-commerce A typical store has a size of 250 sq. feet (it can be less as well). If you have that space in your house, you too can make money. Local space owners are required to deliver products to customers within a 2 to 4 kilometre radius and deliver between 20-30 packages a day.
This can help you earn Rs 18,000-20,000 a month based on per delivery fees. E-commerce deliveries are happening thick and fast, and COVID-19 means that the surge for online goods needs to be met with more hands. To deliver the products, you would need to use an existing cycle or scooter, which is again good use of assets.
Leverage PPF, life insurance to get funding
Use your PPF, life insurance policies to get cheap loans. After opening a PPF account, you can avail loan from the third year and till the sixth year. The amount of loan is limited to 25% of the balance that stood in the PPF account of the person at the end of 2nd year or the year preceding the year in which loan has been applied.
For this you forego your PPF interest and also pay 1% extra. You will have to repay the loan amount within 36 months. The repayment can be done through lumpsum or installments.
Leverage PPF, life insurance to get funding If you want to apply for this funding, approach your bank or nearest post office with form 'D'. Though PPF and life insurance are long-term investments, these are desperate times and one can use the facility to raise cash against them temporarily.
In case of the life insurance policy loans, a policy loan is issued by an insurance company by using the cash value of that person's life insurance policy as collateral. Funding can be as high as Rs 1-5 crore if your policy cash value is adequate.
Usually, policyholders can get loans equal to 80-90% of the surrender value of the policy. One can get this loan in a matter of 3-5 days with minimal delays. If a borrower fails to repay a policy loan, the loan dues are deducted from the insurance death benefit.
The more the premium paid under the policy and the number of times, the lower will be the interest rate usually. Infact, loans on life insurance policies are way cheaper than those for personal loans offered by banks and other lenders. Unlike other loans, there is no cumbersome application process for a loan against your insurance policy.
Use your home, car to get money
Without selling your home or car, you can raise cash against them. This ensures that your temporary COVID-19 related financial cash crunch is taken care of, without you & your family having to part with your cherished asset.
In case of loan against property or overdraft facility against property (LAP), you can raise upto Rs 5 crore at a floating rate in top banks with maximum repayment tenure of 10-20 years.
Use your home, car to get money Though taking funding by using your home is not an ideal situation, selling off your home is not a solution too. Your requirements may be 20-30% of home value, and so taking a LAP makes common sense if property is the only asset you have.
In a difficult situation, assets like a car can also come handy. You can fulfill your financial requirement by availing loan against your car, starting from Rs 1 lakh usually. Top banks give upto 50% of the original value of the car as loan.
In case of loan against car, you can get up to Rs 20 lakh that can be repaid within a tenor of 12 to 60 months. This usually involves minimal documentation and there is easy-to-meet eligibility criteria.
If your car or home is already under loan, you can avail top-up loan facility to get more money if the lender allows. Banks also provide pre-approved offers to privileged customers with ultra-fast processing and minimal documentation.
Ask salary advance from employer
Your job is your biggest asset. We will explain why. Imagine you earn Rs 30,000 per month. That is Rs 3.6 lakh a year. Do you know the value of an asset that brings Rs 3.6 lakh annually
You would have to keep an FD of Rs 65 lakh to get Rs 3.6 lakh per year. So, in this funding option, that we are going to tell you how you can utilize yourself. This option is called salary advance from the employer.
Ask salary advance from employer In this option, depending upon your employer, you could get 1-6 months salary which can be repaid in tenure upto 24 months. Many companies today encourage this option because it allows them to retain talented employees over a longer term.
The employer becomes your bank for a short-term emergency like Covid-related financial crunch. Usually the interest rate is quite low at 4-5%, but new tech companies sometimes don't even charge any interest.
This money can be applied and received within a week's time because all your details etc. are with the company itself. The repayment amount will be deducted from your each month's salary, making it a hassle-free option.
(Written by Kumar Shankar Roy. Author is a financial journalist, specialising in personal finance.)
Disclaimer: The views expressed above are solely of the author and not those of ETV Bharat or its management. Above views must not be construed as investment advice and ETV Bharat recommends readers to consult a qualified advisor before making any investment.
If you have any queries related to personal finances, we will try get those answered by an expert. Reach out to us atbusinessdesk@etvbharat.comwith complete details.
