Over the past few decades, accessing loans has become increasingly easier. Ask the elders in your house, and they will tell you how hard it was to get a loan back in the day. From overwhelming paperwork to lengthy approval cycles, the difficulty in accessing loan funds pushed people away from utilising this excellent financing tool.
However, things are much easier now. Owing to the tech advancements and the increased purchasing power of Indians, financial institutions are now more comfortable in sanctioning loans. The situation is even better if you have some sort of security to use as collateral for your loan.
This brings us to this article's main motive– Kisan Vikas Patra. If you have access to this savings scheme and are wondering how to take a loan against Kisan Vikas Patra, this article is for you.
Read on as we explore, in detail, the correct way to apply for a loan against Kisan Vikas Patra.
What is a Kisan Vikas Patra?
Launched by the India Post in the late 1980s, the Kisan Vikas Patra is a savings scheme for Indian farmers. It was discontinued in 2011 but was once again brought back as a viable government-backed investment option in 2014.
Interestingly, unlike the name, this security is not exclusive to farmers. You can apply for the scheme yourself if you meet its eligibility criteria. You can invest your money in the Kisan Vikas Patra from your nearest private or public financial institution or even the post office.
This fixed-return investment avenue currently offers an attractive interest rate of 7.5% per annum and is locked in to double your deposits. However, this interest rate may change, as per the direction of India’s Finance Minister.
Features of KVP
The following features of the Kisan Vikas Patra (KVP) make it a safe and attractive investment option in India:
Eligible candidates
- Indian citizens older than 18 years - Trusts (Excluding NRIs and HUF) - Minors above the age of 10 - Guardians on behalf of their minors
Tenure
Investment tenure depends upon the ongoing interest rate (Currently 115 months)
Interest rate
7.5% per annum (Subject to changes)
Minimum and maximum investment
Minimum: Rs. 1000 There is no limit on the maximum investment
Transferability
Can be transferred to a bank or another individual
Premature withdrawal instance
- Death of investment owner - Court orders - Forfeit by pledgee (Gazette officer)
Collateral
You can take a loan against Kisan Vikas Patra.
What is a loan against KVP?
When you opt for a loan against Kisan Vikas Patra, you are essentially applying for a secured loan where your KVP certificate acts as collateral. There may come times when you might require funds for personal or business needs. In such scenarios, prematurely encashing your KVP is not the best option– especially since you will lose the opportunity to double your investment.
Securing a loan against Kisan Vikas Patra is a much better solution. With your KVP certificates, you can easily access a loan amount of up to 80% of your KVP’s value. The secured nature of the loan will also fetch you competitive deals on the loan against KVP interest rates. The best part? You will continue to earn interest on the KVP while also getting access to the required funds.
How do you apply for a loan against KVP?
If you wish to take a loan against Kisan Vikas Patra, you need to take the following steps:
1. Choose a lender: The first step is to select a financial institution that offers loans against KVP. For this, you must compare loan terms and the loan against security interest rates offered by multiple lenders.
2. Understand loan terms: Once you select a lender, your loan terms will be crafted according to your profile and credit history. The terms will include the amount sanctioned, loan tenure, and the loan against KVP interest rates. Usually, banks offer up to 80% of the KVP value as loans.
3. Gather documents: Prepare the documents required for a loan against Kisan Vikas Patra. This usually includes the original KVP certificate, income proof, and other necessary documents.
4. Apply: Complete the lender's application form and submit it with your documents and KVP certificate.
5. Pledge KVP: If your loan against the Kisan Vikas Patra application is approved, you must pledge your KVP certificate as collateral.
6. Receive funds: Once the KVP certificates are pledged and the lending institution is informed, you shall see the loan amounts reflected in your account.
Once you receive your funds, the repayment period will start soon after. Ensure that you repay your loan promptly. Defaulting your loan repayments can dent your credit score and may even cause you to lose ownership of your KVP certificates.
To ensure that your EMIs are not overwhelming, our advice will be to have proper information about your estimated EMI before applying for a loan against Kisan Vikas Patra. For this, you can use an online loan against securities EMI calculator.
Documents required for a loan against KVP
The required documents may vary from vendor to vendor,
1. Pay slips or Income Tax Return (ITR) documents as evidence of repayment capacity
2. The original Kisan Vikas Patra (KVP) certificate
3. A KVP pledge application in Form 4
4. A duly signed acceptance letter from the pledgee
The bottom line
Taking a loan against Kisan Vikas Patra can be a smart way to meet your financial needs without disrupting your investment plan. With instant access to funds up to 80% of your KVP value, you can seamlessly tackle any financial crunch or seize any opportunity. However, as with any other finance-related decision, it is advisable to make a call after consulting with a financial expert.
Looking for the best place to secure a loan against Kisan Vikas Patra? Consider taking advantage of Tata Capital’s loan against security features. Offering competitive loans against security interest rates and a seamless application and approval process, Tata Capital offers a convenient solution to your loan financing needs.
08 March 2024
6 mins read
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