An emergency situation may come unannounced. Whether it is a medical crisis or financial deprivation induced by unemployment, such moments can make us feel vulnerable and helpless.
To preempt such difficult situations, one should always keep some emergency cash aside. Whether a savings account, a fixed deposit, or an insurance policy- a lump sum of money should always be kept untouched.
However, things don’t always work out as planned, and one might need to avail of alternate possibilities owing to a dearth of savings.
5 ways one can get some emergency cash in India to battle a financially challenging time
1. Getting a Credit Line Facility:
Generally speaking, a lender may go into two kinds of loan arrangements with the borrower- the traditional fixed amount loan as we know it and the line of credit.
While the fixed or variable-interest loan is common knowledge, a line of credit is less talked of.
A line of credit or credit line facility is a revolving loan arrangement from a bank or financial institution which enables you to borrow portions of money from a certain designated amount for a particular period.
Imagine a pool of a fixed sum from which you can borrow any amount at certain time intervals. Once you repay the money, it gets added to the remaining credit available for further borrowing.
This period available for borrowing is called the draw period. The time at the end of the draw period by which any outstanding amount must be repaid is called the repayment period.
The difference between a loan and a line of credit is that while a loan puts out a lump sum for borrowing, a line of credit enables you to borrow portions of the sum according to your needs as and when required. This means you can choose not to utilize the better half of the loan amount if you don’t need it and therefore save having to pay interest on it.
A line of credit has a few clear advantages over a loan – with the former, you have to pay interest only when you borrow from the pool of money instead of paying interest from the very moment the loan amount is disbursed, as with the latter.
A line of credit is also more suited as opposed to a traditional loan when the exact monetary amount required is unknown or fluctuating.
2. Taking a Personal Loan
Personal loans require less documentation and minimal paperwork, which is why it gets disbursed almost instantly and can act as a saving grace during times of emergency.
Because personal loans are unsecured loans, they are charged against high-interest rates in the market. However, many NBFCs and online lenders now offer personal loans at relatively lower interest rates, for example, Money View.
You can also negotiate with the lender for a lower rate if you have a successful credit history.
These are flexible loans that can be used to fulfill almost any purpose without providing lengthy accounts of the reason behind borrowing.
3. Loan Against a Fixed Deposit
A fixed deposit is a great investment option that lets you save your money and benefit from saving it at the same time.
A fixed deposit account is where you deposit your savings alongside a high-interest rate which gets accrued on the principal amount for a predetermined time period. At the end of the period, you get compound interest on the principal amount besides a complete return of the amount.
It is a popular option because fixed deposit accounts are not subjected to fluctuations in the market rate. This means, if the rate of interest at the time of maturity is less than at the time of application, you will still be entitled to the original rate.
This makes it a more profitable option as compared to other assets such as gold or property, which are subject to market risks.
Now, most banks impose a penalty if you break your fixed deposit before the time of maturity. This deprives you of the highest maximum return, and you can end up losing money.
Instead, in case of urgent cash requirements, you can apply for a loan against a fixed deposit where your FD account will be pledged security in case of inability to repay.
With this option, you can multiply your money and use it in case of emergencies while protecting your fixed deposit account at the same time with timely repayments.
4. Getting a Top-Up Loan On Your Existing Loan
If you have an ongoing loan with a bank or NBFC, you can apply for a top-up over that loan amount.
A top-up loan is considered more fruitful than an additional loan for multiple reasons when in need of some urgent cash.
First, top-up loans charge lower interest rates than other loans, such as a loan against property. Second, they significantly reduce documentation and processing time since your details are already in the database under your previous loan.
Finally, they are disbursed quickly for the above reasons and hence can be a secure go-to option in times of an emergency.
Procuring top-up loans is easy as long as you have a history of timely repayment with your original loan. Moreover, they have no restrictions on usage and can be used to meet a number of pressing requirements in a hassle-free manner.
5. Asking a Friend/Relative or Requesting an Advance from Employer
All of us have friends and family members whom we can depend on during difficult times.
Asking a trusted friend or a relative for money during emergencies can prove to be a quicker and more hassle-free recourse than getting caught up in the endless paperwork of traditional secured loan applications.
However, money borrowed from an acquaintance should be treated with the utmost seriousness and repaid at the earliest opportunity. One should not behave recklessly simply because the loan amount has been borrowed from a known person.
Lack of prompt and serious attitude can lead to strained relations, and worse, can escalate to dire and unforeseen legal circumstances, and should therefore be avoided at all costs.
Alternatively, you can also request your employer for a couple of months’ advance, which can be deducted in smaller sums over the length of a few months.
Unless your company has stringent guidelines which can, under no circumstances, be altered, this arrangement can be less of a financial burden if the terms and conditions are ironed out properly.
Other miscellaneous ways to get emergency cash
The ways mentioned above do not form an exclusive list of ways to obtain emergency cash in India. There are various other loan schemes offered by banks, NBFCs, as well as online lenders and groups that can rescue you from a financial crunch in case of emergencies.
However, be wary of schemes that appear too good to be true, and be sure to do your research verifying the lender’s credibility before applying for a loan. Additionally, read the terms and conditions in the final loan application thoroughly to ensure no hidden charges are being extracted.
Other available options are a credit card loan, loan against property, gold loan, etc. But these schemes either charge exorbitant interest rates or involve rigorous paperwork that can effectively delay the whole process. This can ultimately prove to be a disadvantage when one is running under time constraints.
Today, a variety of loan options are available at variable rates and repayment tenures.
Make sure you compare the rates of multiple banks and financial institutions to make an informed decision best suited to your financial condition.