With the Sensex down 20% since the beginning of the year, many investors feel the pinch. Besides the loss in value of investments, was the use of your stock market investments as too little security.
In a property loan application, the shares of investment funds can be used as collateral to obtain a greater amount sanctioned. However, the sharp fall in the value of blue chips and even the fear that things could get worse would be significantly reduced eligibility.
The bankers, therefore, advising on debt instruments as collateral. "And 'safer storage bills, because the loan to value (LTV) is higher and less volatile," said RK Bansal, Senior Executive Director, IDBI Bank.
Keep your hand that security is similar to taking a loan against these. Sanction of bank loans up to 50-60% of current market value of securities. If the current market value of the shares is Rs 8 lakh for Rs 10 lakh a year earlier, banks sanction only Rs 4 lakh.
When you do not want to liquidate your investments, you can keep it as collateral and sell it when the markets go up, pay for lack of funding, says S Govindan, General Manager, Personal Banking and Operations, Union Bank of India . However, a plunge in stock prices a nightmare. "It depends on the structure of loans, varying according to the bank. Deposits can be taken to compensate the borrower and low-income, or to improve the loan," said Arvind Hali, head, retail assets, Dhanlaxmi Bank.
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If the investment is to support the income, banks can sell their shares, or asks you to pay or provide further investment to offset a dip in share price. If the VTL support, that could be saved if the property price has gone up to compensate for the decrease in the share price. Then, the bank can not sell shares. Bankers, therefore, recommends the use of investment funds in excess of the loan as you may or may not be able to support the weight of the load above the monthly equivalent.
Alternatively, using a fixed-income investments may be safer. On the other hand, debt instruments to produce a fixed rate of return (6-8%), similar to the RS Sangapura, General Manager, Retail, Canara Bank.
You can get up to 85% of the value of investments in National Savings Certificates / Kisan Vikas Patra / Indira Vikas Patras and life insurance. Pension funds may be committed, because it is not an instrument, but rather an account. When investments held as collateral, you must transfer ownership of the bank until the loan is fully repaid.
Some banks do not guarantee a larger loan, which, however, apply to investment in roads, against loans. An interest rate is charged. The LTV, in this case is the same as the warranty. Again, the loan-to-pay is more expensive than fixed income securities. State Bank of India (SBI), the costs of 6.5% above the base rate, which is 16.50% per year. And 14.5% of the debt instruments. A loan on time deposits is an interest rate of 2-2.5% above the rate of time deposit. With SBI, you would pay 11.25 to 11.75%, cheaper than a loan against any other investment.
Source: [Business Standard]