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The Liquidator
 
THE LIQUIDATOR: GETTING LIQUID ASSETS TO WORK FOR YOU
So, purchasing the list of white goods for your home for Diwali/ buying the new flat at Hiranandani gardens isn’t materialising due to a cash crunch? The easiest option would be to postpone these plans for better days and the probably the most foolhardy if you haven’t tried any loan financing options.
There are ways and means of obtaining finance. No we are not talking about touching you relative/friend for some quid and feeling obliged. Nor do you need to go through the melodramatic scenes of selling the family silver to raise the required amounts. There are a lot of illiquid assets, which can be tapped for raising loans or getting money without disposing them off totally. The catch is to figure out which avenue to tap depending on the amount required, collateral needed and the period for which you require the funds. Surprised, eh? Read on and see what option meets your needs best.

So let’s find out how we can raise money without selling your assets:

MORTGAGING YOUR HOME :
Do you own one of those ancestral homes/ or cosy flats in some metro or Grade A city? If yes, and its location is looked upon favourably by the bank then mortgaging your home could be one option. Banks like Citibank, ANZ Grindlays or a housing finance player like HDFC offer this facility. Some offer a loan on commercial and residential property, others stick to residential. However, only around 35 per cent to 50 per cent of the value of the property will be given as a loan. That too, they will send their own valuators to fix the value. Your word or assessment isn’t enough to go by. There are a few pre-conditions to all this:

a) The title deed should be in your name.
b) The property should not be disputed.
c) The property should be fully paid up for

UTILISING A FIXED DEPOSIT :
If you are the thrifty sort who has diligently been putting away a portion of your income in fixed deposits, you can break them. This is all the more easier, what with most new private banks are marketing their deposits as 'cluster' deposits. So you really don't have to break the entire amount, but just the amount you require. The balance in the account will continue to earn the pre-designated rate of interest.
The rules between banks vary. Some may keep Rs 10 or even just a rupee as one unit. Others may insist that you withdraw in multiples of 10 or 100. You will earn interest only for the time the amount is deposited. Assuming that you deposit Rs 1,00,000 for two years at an interest of 14 per cent per annum and after a year, you withdraw Rs 50,000. The balance Rs 50,000 will earn the 1 year rate, say 12 per cent and not 14 per cent.
Though the Reserve Bank of India has done away with the mandatory levy of a penalty on breaking deposits, some banks still levy it. This could be about 1 per cent bringing the rate of interest down to 11 per cent.
But before you go about breaking your fixed deposits, you could try the overdraft facility. In this case, calculate to see where you stand to gain — whether by breaking your FD or using an overdraft. But as a rule of thumb, if you are taking the deposit for a short period of time, say a couple of months, then go for an overdraft. If it is for a longer period of time, then breaking the deposit will be wiser.

P P F :
Been using the PPF for tax saving purposes? Besides saving tax, you can also raise loans from this account. Here again there are a number of pre-conditions, which are unavoidable. Eg. You can take a loan on your PPF account, but only from the second year onwards. The amount sanctioned will be up to 25 per cent of the balance to your credit at the end of the preceding financial year. Also, you cannot opt for another loan till the first is fully repaid.
The biggest advantage with this loan is repayment charges. The principal has to be repaid within 36 months at an interest rate of 1 per cent per annum! Even the delay isn’t too taxing —the interest goes up to 6 per cent per annum.
A partial withdrawal is also permitted from the seventh year onwards. But take this only if you need the money desperately, say for purchasing a house and you cannot replace the funds. Other small savings schemes like the post office recurring deposit, post office time deposits, National Savings Schemes (NSC) also offer premature withdrawal facilities.

PROVIDENT FUND :
Another option, though we suggest it as a last resort one, would be to take a withdrawal from your provident fund. Withdrawals from this would mean tampering with your pension plans. However, the Provident Fund Act itself guards against unnecessary withdrawals and the amount permitted to be withdrawn is also subject to certain limits.
Withdrawals are permitted only if you require money for buying or constructing a home, repayment of a housing loan, payment of bills for illnesses, marriage and post matriculation education of children. In the vent of your not getting wages for a continuous period of two months or the factory and establishment where you were employed has been shut down for more than 15 days without providing for compensation to its employees, you can use your provident fund balance. You also have to fulfill other criteria such as being a contributor for a certain number of years.

LOANS AGAINST SHARES:
Banks now offers you an option to put your carefully accumulated portfolio of shares to work. When you need money in a hurry, you can put your investments to good use by drawing an overdraft against your shares.


Besides being flexible and easy, your portfolio stays intact as you enjoy the freedom of cashing in on it’s value.

You can make a trip to the bank with them to raise loans against them. But this is done subject to strict criteria laid down by the bank. For starters, they have a list of approved securities against which they will lend. Besides shares, units of mutual funds, National Savings Certificates (NSC), public sector bonds and non-convertible debentures are also considered. The bank then determines the market value of the shares and correspondingly the face value of the public sector bonds, NSCs along with the quoted repurchase price of units.

On valuing the portfolio on these parameters, you can get a loan, which is a percentage of the total value. The limit here varies depending on whether your shares are of demat or physical variety. To get an in-depth information, move over to the bankschempage section.
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