Common Financial Instruments that can Help you Get Short-Term Loans


02 Dec 2020 | 5 min read

People use their savings to invest in properties, gold, and financial instruments such as bonds, shares, mutual funds, fixed deposits, policies issued by LIC and select private insurance companies, NSC, etc. But people tend to take a loan when it comes to covering other financial emergencies and needs. 

Many people may not know but there are several kinds of financial instruments that holders can get a loan against to meet their financial requirements. These loans are hassle-free and offer immediate liquidity. 

We have listed some of the financial instruments against which you can take out loans in the following table: 


Interest Rate (p.a.)

Loan to Value (LTV)

Loan against Residential Property

11% to 15%

60% – 75%

Loan against Shares

11% to 22%

Up to 50%

Loan against Gold

12% to 17%

Up to 75%

Loan against Fixed Deposit

2% – 3% higher than the fixed deposit rate

Up to 90%

Loan against Life Insurance Policy

9% to 10%

85% – 90%

1. Loan against Residential Property 

You can use your residential property to get a loan. You can get up to 60 percent to 70 percent of your property's value.  The repayment tenure varies from lender to lender, from 2 to 20 years. 

In addition, interest rates paid on a loan against property typically vary from 11% to 15% p.a. 

2. Loan against Shares 

You can take out a loan against securities, including shares and mutual funds. The rate of interest applicable on this type of loan will be between 11 percent and 22 percent p.a. The tenure and the loan amount, however, depend on the internal policy of a bank or NBFC. Generally, you can get a loan of up to 50% of the value of the shares.

3. Loan against Gold 

It is a very common practice to obtain a loan against gold. The overall loan to value (LTV) is 75 percent, according to the RBI guidelines. Usually, the period is 12 months and the interest rates charged are from 12%-17% p.a. 

4. Loan against a fixed deposit 

If you have an FD (Fixed Deposit), you can get a loan against it. The tenure of this form of loan is the same as that of your fixed deposit with a bank. The interest rates applicable are 2%-3% higher than the interest rates on your fixed interest rate.

The maximum LTV is 90 percent of the balance of your bank account's fixed deposit. 

5. Loan against Life Insurance Policy 

You can also take a loan against your life insurance policy and endowment policy. You can get a loan amount between 85% to 90% of the surrender value. The rate of interest on a loan against a life insurance policy ranges from 9% to 10% per annum. 

Here are a few advantages that you can get by availing of loans against financial instruments: 

  • Enjoy a lower rate of interest 

Since a loan against financial instruments is a secured borrowing option, the risk for a lender is minimized as any damages can be recovered by making a legal claim on the instrument. The key reason why lenders give a nominal interest rate on this form of loan is this protection. As a result, the overall cost of your loan decreases.

  • Get a Large Sanction 

You pledge any properties you own as collateral while choosing for a loan against the land. An amount ranging from 75 % to 90 % of the actual market value of the property is then approved by the lender. This ratio also depends on whether the property is commercial or residential and whether it is occupied or empty.

  • Repay over a longer-term 

The fact that you can repay the loan over an extended tenure is a key advantage of opting for a loan against a financial instrument. The tenure will last up to 20 years, depending on the lender. When repaying a large amount, this is particularly beneficial as it enables you to tailor your repayment by opting for an acceptable monthly installments.

Usually, when it comes to an unsecured loan, the maturity period you can access is up to 60 months. This can result in heavy EMIs that you will find it difficult to service each month if you borrow a high sum.

  • Get tax benefits on interest payments

Another excellent feature of a loan against a financial instrument is that it helps you to get tax benefits on interest payments. It is important to remember, however, that these advantages apply only if you use the loan for particular purposes.


In financial emergencies, you usually apply for a personal loan. However, you can also get a personal loan against your investments for short-term financial needs. You can use your residential property to get a long-term loan and fixed deposits for both short and mid-term loans to meet your personal and business requirements. 

Read More: Top Bank Fixed Deposits Rates in India

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