Financial emergencies may strike at any given time. Whether it is an urgent medical attention, a major personal expense or maybe even a substantial business decision. When met with such emergencies, individuals are most likely to exhaust their savings or opt for an unsecured loan with high interest rates.
But what if we tell you that there is an underrated method of financing that is easier to sanction and can help you save on interest payments? A loan against National Savings Certificates (NSC) allows you to meet your financial needs without liquidating your savings or settling for high interest rates.
Read on to learn more about this financing tool and understand the numerous ways you can benefit from a loan against NSC.
What Is National Savings Certificates?
National Savings Certificates are government-backed savings instruments that offer a safe investment option. These certificates are usually used to diversify the investor's portfolio due to their guaranteed return and tax-saving features.
You can purchase an NSC certificate from your nearby Post office which carries a maturity period of 5 years. The best part– there is no upper limit to the number of certificates you can hold. So, you can buy as many NSCs as you want.
The interest rates offered by NSCs are higher than a regular savings account. However, the interest rates are revised by the Indian government every quarter. NSCs can also enjoy tax benefits, as Section 80C of the Income Tax Act allows owners of NSC certificates to avail tax deductions up to Rs. 1.5 Lakhs.
Owing to their guaranteed returns and government backing, these securities can be seamlessly utilised as collateral for loans.
Benefits of Taking a Loan Against NSC
By securing a loan against NSC, you can enjoy the following benefits:
1. Multi-purpose Usage
One of the best features of taking a loan against NSC is its flexibility. Unlike other forms of loan, a loan on NSC certificate has no restriction regarding the end use of funds. Hence, you can use the loan amount to fulfil personal, business, medical, educational, or even household requirements.
2. Higher Loan Amount
A loan on NSC certificate empowers you to get access to a substantial amount of funds. In most cases, financial institutions can offer a loan amount as high as 90% of the NSC value. However, the tenure of the certificate plays a key role in the sanctioned loan amount. For instance, a certificate which has been issued for more than 3 years can attract a higher value as compared to a newly issued NSC certificate.
3. Lower Interest Rates
Loans against NSC interest rates are renowned for being more competitive than other loan forms. While the final interest rate depends on your overall profile and credit history, a loan against security interest rate can be significantly lower than a personal loan. If you have similar requirements, experts suggest opting for a loan against NSC instead.
4. Loan Tenure
The tenure of a loan against NSC usually lasts as long as the validity of the certificates. Let us say that your NSC will mature after 5 years, then the tenure of your loan will also be 5 years. However, you also have the provision to repay the loan amount before the tenure. Some institutions even allow repayment EMI.
All the below mentioned details may change from time to time -
How to Take a Loan Against NSC?
If you wish to take a loan against NSC certificates, you need to follow these simple steps:
1. Collect the NC41 form from your nearest post office and fill it up with your required details
2. Submit the form along with the documents required for a loan against security
3. Once approved by the postmaster, pay the required fees at the post office
4. The post office shall release the pledge, and the amount will get transferred to your desired financial institution
5. Once the institution receives the pledged certificate, your loan amount will be sanctioned.
Eligibility Criteria
Securing a loan on NSC is a simplified process as long as you fulfil these basic eligibility criteria:
1. Nationality: Only individuals with Indian citizenship can avail of a loan against NSC.
2. Age: Since NSC can be bought on behalf of a minor, financial institutions have dictated a minimum age eligibility of 18 years when applying for a loan against NSC. On the other end of the spectrum, the maximum age to apply for a loan on NSC is 75 years.
3. Ownership: A loan against NSC can only be sanctioned for the owner of the certificates. So, if you wish to take a loan on your NSC, ensure that your name is mentioned on the certificates.
Documents Required for Loan Against Securities (NSC)
Before you apply for a loan against NSC, make sure that you have these documents handy:
1. ID Proof: Any government-approved identity card, like Aadhaar card, Driver’s license, Passport, or Voter ID card.
2. Income Proof: The institution sanctioning your loan might ask for income proof to gauge your repayment ability. Form 16, Income Tax returns, and salary certificates can be accepted as valid proof of income.
3. Original NSC: The original copy of the National Saving Certificate needs to be submitted to the lending institution.
4. Photographs: Valid passport-size photographs with a clear focus need to be attached to the form.
To Sum Up
Instead of exhausting your savings or opting for loans with higher interest rates, a loan on NSC certificates is a cost-effective way to finance your needs. With lucrative benefits like lower interest rates, flexible usage, and significant loan amounts, taking a loan against NSC is an underrated yet effective financial solution.
Choose a loan against securities with Tata Capital and enjoy a hassle-free experience. Renowned for its minimal documentation, streamlined application process, competitive loan interest rates, and swift disbursement, Tata Capital is the ideal option for your financial needs.
Visit Tata Capital’s website or download the app to apply for a loan today!
11 March 2024
5 mins read
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