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Loan / Overdraft against NSC

NSCs of post office is a tool for saving/ investment and savings under 80 C.

NSCs have tenure of six years and the rate of interest is not subject to any fluctuations based on the market conditions. The rate of interest is compounded half-yearly.

If you are paying in cash, the certificates are issued immediately. But if you pay by demand draft or cheque, the certificates are issued on realisation of the instrument. Therefore, it is advisable to tender cash and collect the certificates immediately.

The interest is fixed at the time of issue of the certificate unlike the PPF account where the interest can be changed without any notice and that too on the investments made in the past.

How to use National Saving Certificates as security for your loans:

You can obtain loans from banks against them.National Saving Certificates can be used as collateral if you are looking to avail loans. This option is very suitable as the interest charged for the loans taken against NSCs is much lesser in comparison to the interest charged on personal loans.

In case you are temporarily facing financial crunch ,NSCs are best suited for you.

Process for taking the loan from Banks:

Once you receive the certificates from post office you can approach any bank to get a loan against security of these certificates.

It is advisable to approach the bank where you have banking relations so as to ensure faster disposal of your application.

As per the rules governing NSCs, the post offices are authorised to mark pledged in favour of banks.

You have to make an application for marking pledged on the NSCs in favour of the lender, which has to be signed by you and the lender.

Once you tender the NSCs together with the application for marking of the pledge, the post office will mark the pledge on the certificates and return the certificates to the bank.

On receipt of the NSCs duly marked as pledged, the bank will disburse the loan. You can repay this money which you have borrowed from your friend or relative.

There are two options with regard to taking loan against security of NSCs i.e. either you can take a demand loan against NSC and pay in monthly EMIs or you can obtain an overdraft facility against NSCs.

In case you think your cash flow is volatile(fund need not fixed ) taking an overdraft account gives you flexibility to use the funds as and when they are needed. However, if you expect to pay certain sum every month, taking a demand loan against NSC is advisable.

The process for obtaining the loan or overdraft against the NSCs is quite simple and not as expensive as any other unsecured loans such as personal loans . The banks normally grant you a loan up to 80% to 90% of the face value of the NSCs.

Rate of interest charged on Loan/Overdraft:

The rate of interest charged on the loan against NSCs or overdrafts is very competitive and is lower than the rate charged on personal loans.

Interest charged on the overdraft account is little higher than the demand loan against security of the NSC. In addition to the interest, you will have to pay one-time processing charges at 0.5 % to 1% of the amount sanctioned. Generally, there are no prepayment charges on loan taken against NSC.

Once you repaid your loan , bank will write a letter to post office to release the NSCs to you.

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