India has the largest number of post offices in the world. Taking its utility, the government of India plans to launch a scheme known as National Savings Certificate, popularly as NSC which has now become the most secured option to avail the loan.
Loan against NSC or NSC loan has accumulated wider attention nowadays for their easy availability and security reasons. Due to their lower interest rates and low-risk factor, Loan against NSC from The post office is the safest option available in the market.
National Savings Certificate, shortened to NSC is Government initiative wherein you have the facility to open fixed-income investment with any post office. It is a tax saving investment that enables the small and middle-level investors to save on income tax while investing in it.
There are two fixed maturity periods available in the NSC – 5 years and 10 years. Certificates under the VIII issue mature in 5 years while the certificates under the IX issue mature in 10 years.
National Savings Certificate(NSC) can be used to avail of the Loan facility as well. Advanced by the Government of India, NSC is the safest option to be used against loans as in terms of collateral/security. Banks can easily provide loans to ones with National Savings Certificate holders and since the rates of interest in NSC remain the same at the time of issue, they are in accordance with the policies in place in a bank.
Let’s talk about NSC in a bit of detail.
1. Lower interest rates- They have comparably lower rates of interest than personal loans. Currently, the interest rate has been fixed at 6.8% annually.
2. Minimum Investments- As low as an amount of Rs.100 can be purchased on an NSC. However, other denominations available for the purchase are Rs.10,000, Rs.5,000, Rs.1,000, Rs.500, and Rs.100.
3. Flexibility in Maturity tenure- NSC comes in two different maturity periods- 5 years and 10 years.
4. Nomination facility- one of the best the part about NSC is that family member including minors could be made nominees by the investors.
5. Loan against NSC- Being the most secured and safest investment, NSC can be used in the form of collateral for availing loans. Borrow to invest in NSC National Savings Certificate are the brightest option available when you are in a financial crisis. You can collect funds and ask for the NSC which can be an extended unutilized portion of the deduction available under Section 80C.
After receiving the NSC from the post office, you can visit any bank near to you or the one from which you want to avail of the loan facility.
It is mandatory for the post office to mark pledged in favor of scheduled banks. Therefore, you make an application signed by both you and the lender which is to be now pledged by the post office and redirected to the bank. Now the loan can be disbursed by the bank and you can pay the collected money here.
Now, there are two ways in which you avail the loan against the NSC facility. One is to take a flat loan against NSC and pay in monthly EMIs while the other being by obtaining an overdraft facility against the security of these.
It totally depends on you with which one you would like to go. Either you pay a fixed amount every month or instead use the flexibility of funds as and when they are needed.
ID Proof – An applicant should provide a valid government ID proof.
Income proof – Income proofs are asked by the bank at the time of issuing.
Passport size photograph of the applicant
Original NSCs – An individual would have to furnish his/her original National Savings Certificates before obtaining a loan.
Rates of interest -Normally, interest rates for NSC are lower than for personal loans. Also, their rates of interest change according to the decisions taken by the Finance ministry. The current interest rates for NSC are 6.8% and they are
compounded on an annual basis. The procedure of taking a loan against NSC
1. Form- An applicant must fill Form NC41 which is easily available at the post office or can be searched online. Original documents are required to fill the form and have to be signed by both the pledger and pledgee.
2. Process- This involves the approval of the post office and later sent to the bank.
3. Fees- The post office has the right to charge the necessary fee from the applicant on behalf of the process completed.
4. Release of the pledge- After the release of pledge, the post office retransfers the certificates taking into consideration that they have been received by the bank.
5. Repayment period- the repayment period differs according to the loan amount.
NSC is one of the safest methods available to get loans. They are put as collateral with the banks and then they sanction the loan in the borrower’s name.
NSC can only be pledged to the approved ones as per the rules released by the post office. They can be pledged in favor of banks.
The current rate of interest is fixed at 6.8% in the post office. They are usually lower than interest rates on personal loans.
As discussed earlier, they are the most secure and safest for loans.