Money is in shortage but emergencies are not. Murphy’s law waits for no one. “If anything can go wrong it will”. It’s in such emergencies that you need a personal loan. A personal loan is unique as the bank does not ask you the reason for availing the loan. You can avail this loan for a medical emergency, to buy a consumer durable or for a marriage. You can also avail a personal loan to pay back a borrowed loan or take a foreign holiday.
You also don’t need to give collateral (security) when you avail this loan. This means personal loan for an emergency is a must.
What is an Emergency Loan?
Emergency loans are also called personal loans. Financial institutions do not ask for collateral on such loans, hence they are unsecured loans. This is also a trigger for banks to charge higher rate of interest on personal loans.
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1. High-cost loans: Emergency loans have high interest rates and short repayment tenures. This makes EMI amounts large.
2. Easily approved: Usually, emergency loans are approved easily and often disbursed within a day or a few days. Hence, they are easy to access.
3. Cheaper alternatives: Emergency loans have cheaper alternatives like loans against gold, shares and deposits. These have lower interest rates as they enjoy asset-backing.
4. Strictly for emergency purpose: Avail an emergency loan only in times of financial emergency. Do not avail emergency loans or personal loans for travel or buying a car. This will mess up your finances.
5. Negotiate for best interest rates: Banks are running a rat race; hence, if you negotiate smartly, you may get great deals. Even a fraction of a percentage makes huge difference in repayment.
6. Don’t let the loan agreement bully you: Read the loan agreement completely. All the charges, fees and penalties for non-repayment are mentioned in fine print. Never, in any case, rely blindly on the bank relationship manager. He might not disclose important factors like consequences of missed EMIs or a default. He’s a businessman after all!
7. Cash crunch: While the going may be good when you availed the loan, there is always the possibility of things going wrong in the future. A loss of job or another emergency can create short-term cash crunch and inability to meet payment obligations. You should be aware on how to handle such a situation at the time of accessing the loan.
8. Defaults and credit score: Yes, default on repayment of emergency loans can affect your credit score. Banks hesitate to grant loans to applicants with bad credit history and credit score. Also, a clean credit history and good credit score help in negotiating lower interest rates.
There are different types of personal loans that you can choose from:
1. Festival Loans: Festival Loans are specially offered to take care of festive expenses. The loan amounts are usually small. Such loans are availed if there is unavailability of ready funds. These loans have:
2. Wedding Loans: Wedding Loans are availed by couples and families to fund wedding expenses. It can be used to fund hotel bookings, jewelry purchases, catering, decoration, and so on. These loans have:
3. Holiday Loans: Holiday Loans are availed to take care of travel bills. You can avail such loans if you do not want to dip into savings or disturb the monthly budget. These loans have:
4. Home Renovation Loan: Home Renovation Loan helps you finance repair and renovation of your house. Again, you can avail such loans without dipping into your savings. These loans have:
5. Consumer Durable Loans: Consumer Durable Loans are customized personal loans availed to purchase consumer durables such as home appliances and gadgets. These loans have:
6. Unsecured Business Loan: Unsecured Business Loans are availed by businessmen seeking loans to set up or expand a business. These loans are granted without any security or collateral. These loans are granted based on:
7. Fresher Funding: These loans are specially designed for people who are fresher’s or drawing their first salary.
You need to decide if you must avail a personal loan or not. If you are short of money for a medical emergency or your marriage availing a personal loan is a must.
If you avail a personal loan to go on a foreign holiday then you need to remember that repaying this loan may not be easy as it charges an interest as high as 14-17%.
If you are unable to repay the personal loan and default on it then your CIBIL score is affected. You will not be able to avail any other loans especially a home loan when you need it the most.
A home loan is very important and you can use a personal loan to help you secure that dream house. When you purchase a home you need to make a down payment (say 10-20%) of the cost of the home.
You can then avail a home loan for the remaining amount. You can avail a personal loan to make the down payment for a home loan. It serves as a stepping stone to your dream home.
These loans are availed if you live in a tier 1 or 2 city or a metro. If you live in a city you generally avail a personal loan of INR 1-2 Lakhs to meet any emergencies. In a metro you need to avail a personal loan of INR 3-4 Lakhs as living expenses are high.
A personal loan is generally availed by those who are young and just starting their careers. If you are 25-30 years of age you would avail a personal loan.
These loans are then used to buy goods of personal aspiration such as the latest mobile phone or ahigh end laptop even though interest rates on a personal loan are high.You need to be responsible when availing a personal loan. The bank places the responsibility of repaying the loan without any hitches squarely on your shoulders. Avail a personal loan only in an emergency.
Banks sanction your personal loan only if you have a steady job. Banks do not want to suffer losses as these loans are given without any collateral.If you avail a personal loan from the bank where you have an account it is easier to get a personal loan. You can also get the benefit of a lower interest rate.
Yes, paperless personal loans not only save paper, they also make the whole application less complicated. You can get your personal loan approved with just a few clicks. With less human interventions in paperless personal loan transactions, this will be quick, effective and simple for both the lender and borrower.
2. Address Proof: Passport, Driving License, Election ID card.
3. Age Proof: PAN, Passport, Driving License, Voters id, Birth certificate, school/ college leaving certificate.
4. Financial Statements: Bank statement of past 6 months.
In case of emergency, all you have to do is visit your bank’s website and submit your online personal loan application and documents. Lenders give personal loans based on your CIBIL score and credit history.
Remember: Always avail a personal loan responsibly. Personal loan for an emergency is a must.
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