Emergencies occur suddenly, and it is impossible to plan and be ready for them. You can make a rough estimate of your monthly expenses, investments, retirement savings – all of these is possible because you have the necessary data to calculate the required fund. But you cannot assume the range and severity of an emergency.
Several banks and financial institutions have said that the go-to option for people during emergencies is personal loans. There is no guarantee that your loan application will be approved immediately. If your credit score is not up to the mark, it might cause unnecessary complications.
If you have a healthy credit score, getting a personal loan from any bank or financial institution is easier. This is because the credit rating will assure the bank of your prepayment ability in the future – something that can be sketchy and hard to accept for the lender if you lack good credit rating.
Due to the high risk of loan payment defaulting, banks do not offer loans to individuals with low or no credit rating. If there is an emergency, and you need financial support, consider bad credit loans.
Here’s a detailed breakdown of five ways you can avail a loan in case of emergencies.
Credit Card Cash Advance
Most credit cardholders are still unaware that their cards can provide them with instant cash loans during emergencies. This means you could use the credit card to withdraw cash from ATM centres. But you will not be able to draw an unlimited amount of money.
The limit will be depending on the type of credit card that you are using. In any case, you must visit your bank branch and then use the credit card just like any regular debit or ATM card, to get the money. If you want to know about your credit card’s cash limit, you can physically visit the bank’s website or any branch. Otherwise, you can also consider a loan app download.
The highlight feature of a credit card is its immediate response – meaning if your credit card offers cash advance option, you will be able to request for a cash loan. And you will get the loan instantly on the spot, without the need for any approval or formality. It doesn’t affect your credit score at all.
- Immediate cash withdrawal from bank ATMs
- No need for approval or additional formality
- Variable cash loan limit, depending on the card type
- Significantly high ROI
- Banks start charging interest from the very day of withdrawal
- Additional processing fees
- Credit Card Cash Loans do not accumulate rewards points
A payday loan is another option that helps you get funds easily without much complication. You can get this unsecured loan option at plenty of digital financial money lenders.
Usually, you will get your requested fund against the only condition that the repayment must be made on the next payday.
Many salaried professionals have expressed their admiration for it. It had benefitted them in crisis times when they needed emergency financial support but failed to qualify for any personal loan deals due to lousy credit rating.
Banks ask for a post-dated cheque which is their perceived security for the money you get. The cheque will feature both the loaned out amount along with the pre-decided interest.
- Quick loans with a repayment before the next payday
- No need for any collateral or guarantor
- Available for individuals with bad credit score
- Quick loan processing
- Immediate funding timeline
- Less formality and documentation
- Significantly high ROI
- Short period for loan repayment
Home Equity Loan
The third option, home equity loans, is another option that can come to your rescue during the crisis. Here, you have to keep your house as collateral security for the loan.
Home equity loans are somewhat similar to home loan where you will have to pay back both the principal and the interest amount. They are easy to qualify as they come secured. Lenders often do not look at the applicant’s credit score.
- Easy Qualifying Process
- Requires home as a collateral
- High loan amount, somewhat related to the value of the house
- Fixed ROI for the entire loan duration
- No options for tax benefits
- Loan defaulting will reflect in loss of the housing property
Loans Against Insurance Policies
Much like credit card cash loans, most people are still unaware that they could get loans against insurance policies. This is much like the home equity loaning scheme – it is secured, and available, even for people with bad or no credit rating.
The only difference here is your present insurance policies instead of a housing property as collateral. The standard insurance policies that can qualify for being collateral are money-back plans and traditional endowment plans.
- Easy availability
- Open to applicants with no credit rating
- Variable repayment structuring
- Interest-only repayments
- Low ROI
- Loan defaulting will reflect in loss of your retirement fund
Borrow From Friends & Family
Lastly, the most convenient and easy way to arrange emergency funds during a crisis is by borrowing from your family and friends. People close to you and trust will not ask for documentation and detailed formalities to lend you some money. Your close associates are more likely to be empathetic, thereby helping you when facing financial difficulty.
- Loan available with minimal credits
- Room for flexible repayments
- Loan default may result in a damaged relationship
- Less chance of a loan if the associate is not financially stable
All the ways mentioned above will most likely rescue you from the crisis in your life. They come with high-interest rates, meaning in all likeliness, they will propel you to further financial misery if the situation does not improve for you.
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