Financial emergencies often come uninvited. While it is recommended that individuals have contingencies in place to deal with emergencies, not everyone can have this set up. Therefore, individuals often have to turn towards loans to help them overcome their financial stress.
“Most often, people use their fixed assets and debt-free properties as collateral to avail mortgage loans at reasonable interest rates. Bonds, shares and mutual funds are other forms of financial instruments that can be leveraged to obtain loans at affordable rates as compared to personal loans,” says Anuj Kacker, Co-Founder, MoneyTap.
Here are some ways you can get access to instant finances during emergencies like the current Covid crisis.
1. Loan from Fintech Startups
You can follow the recent trend of getting quick, flexible and hassle-free credit lines offered by app-based fintech startups. This option is especially popular among the younger population who are new to credit and need flexible amounts for short-term expenses.
2. Gold Loan
With all-time high prices, gold offers the best cushion to borrow a bigger amount of money against the asset and with very few documentations. “As the collateral offers greater security to the lender, the loan gets approved even if you have a low credit score. Also, the interest rate and processing time is very less compared to other types of secured loans,” says Pranjal Kamra, CEO, Finology.
3. Loan against FD or Life Insurance Policies
It is a type of secure loan where the customer can get the loan instantly by pledging his/her fixed deposits. It is one the best sources for meeting immediate financial needs as the margin amount is very less and one can get up to 90-95% of the deposit amount.
4. Covid-19 Personal Loans
Various banks such as Punjab National Bank, Bank of Baroda, Bank of India have introduced a new category of personal loan, i.e. Covid-19 personal loans, to help customers dealing in financial emergencies due to the ongoing pandemic. “However, the eligibility criteria for loan sanctioning is more stringent than other types of loans, like some banks have higher credit score requirements and also, some banks prefer giving loans to salaried employees or only to their existing customers,” says Kamra.
Kacker of MoneyTap says, “Banks are also offering COVID-19 emergency loans to all types of borrowers, including salaried individuals, self-help groups, MSMEs, and large corporates. Borrowers can avail loans up to 20 times of their last drawn monthly gross salary (up to Rs 2 lakh). Likewise, pensioners can also get loans up to 15 times of their monthly pension within a limit of Rs 2 akh. The tenure of these special loans is five years with concessional interest rates.”
5. Pre-Approved Personal Loans
Pre-approved personal loans, available across marketplaces, are yet another option to get a loan in a couple of days. However, banks offer these loans to individuals who hold a salary account or a credit card with the bank.
6. Loan Against Property
This enables you to borrow money for any purpose by mortgaging your residential or commercial property. The loan tenure can be higher depending upon the borrower’s needs. The loan amount generally depends upon the valuation of the property and the borrower’s financial credibility and in general this ranges between 50% and 60% of the market value of the property. Although taking a loan against property may take a few days or even more than a week in some cases, however, it is the best option if your requirement is for a higher amount.
7. Top Up Loans
For home loan borrowers, a top-up loan is an easy option to borrow money quickly. “You can use the money for any purpose like home renovation, funding child education or any personal purpose. The interest rates are also much lower than the usual personal loan interest rates. Additionally, there is also flexibility in terms of loan tenure. Some banks offer the loan for a period of 20 years or until the outstanding tenure of the existing home loan,” says Kamra.