Traditional insurance policies: They offer very low returns of 5-6% and inadequate insurance cover. Surrendering them will not only bring cash but free the premium amount.
Fixed deposits: Interest rates have fallen very low and the posttax return in the 30% tax bracket is barely 4%. A better option is to liquidate and pay off loans that charge 9-10%.
Debt funds: Interest rates are expected to go up from here, which will bring down the returns of debt funds to less than 5-6%. It is better to redeem these now and pay off loans.
Stocks and equity funds: Markets have had a good run till now but the trend may not sustain. Book partial profi ts and use the sale proceeds to pay off outstanding loans.
Loan from PPF: If you have a PPF account, you can take a loan from the balance at just 1% interest. Such loans can be for up to 3 years. If the loan is not repaid in 36 months, the interest shoots up to 6%.
Loan against insurance policy: You can also get a loan against your traditional life insurance policy. LIC offers loans at 9% simple interest. But only policies that have acquired a paid-up value are eligible.
Loan against car: If you have a car without a loan against it, banks are willing to give you a loan for it. Such loans charge 12-15%. But the car should be in good condition and not more than fi ve years old.
Loan against gold: Jewellery and bullion can be pawned to raise money for paying off loans. Since gold is a very liquid asset, the interest rate can be as low as 8-9%. But watch out for hidden charges.
Loan against property: This is perhaps the best way to raise money for tiding over the cash crunch. Such collateralized loans come at low interest rates and can be used to consolidate costlier debt under loan.
