Topic 4: Need Money In A Hurry? Here Are 7 Easy Options

From salary advance to loans against shares, the cash-generating options to explore are many.

A financial emergency can hit anytime - a sudden hospitalization, a natural calamity or even an unexpected celebrations at short notice. While money pundits say you must have an emergency fund equal to six months expenses in place, not everyone follows this rule diligently. So, where do you get cash instantly to tide over a financial disaster?

Don’t despair.There are few ways you can get money in a pinch, depending on how urgently you want the funds. “The key things that will determine where you get the money from are how urgently you want the funds, the tenure of the loan, the interest and how expensive will it be to source the funds,” says Navin Chandani, Chief Business Development Officer, BankBazaar.com. Before you opt to borrow money, be sure that it is really needed. Even then, borrow as little as possible. Remember, it is a loan and you need to ultimately repay it. If you are unable to do it on time, you could end up in a debt trap.

Borrow From Your Employer:
“ If you need funds ASAP, consider your workplace first. Many companies extend an advance on salaries,” says financial trainer P.V. Subramanyam. The funds could be equivalent to 1-6 months take home pay and will be deducted from the salary over 3-24 months.
Upside: The loan can be customised to your needs, and you will be able to get the money within three days.
Downside: The loan will be taxable as a part of your salary. It will be exempt only if the funds are used for certain medical treatments of the amount is less than Rs.20,000.
Interest Rate: 5-8% (Could also be interest free)

Cash Withdrawal On Credit Card:
A credit card can be used to withdraw money from an ATM, the amount being equivalent to 40-80% of your card limit. However, their might be a cap on daily cash withdrawal. Most banks will allow you to over-extend your limit on case-to-case basis. Be ready to cough up an over-limit fee over and above the usual interest rate on cash advance.
Upside: Instant cash, available anywhere, anytime.
Downside: A transaction fee of 2.5-3%. Interest is levied on the money from the day it is withdrawn until it is fully repaid.
Interest Rate: 2-3.5% a month

Top Up Loan:
Already have a home loan? If yes, you can use it to get a top-up loan of upto Rs. 50 Lakhs for a maximum of 20 years or till the balance tenure of your original home loan. This option works if you have repaid the original home loan for some years as the combined value of the home loan and the top-up cannot exceed 75% of the value of the house.
Upside: You can get a loan quickly, in three days, since the bank has your documents.
Downside: Any default in repayment will cost you big.
Interest Rate: 9-13%

Loan Against Property:
If you want a large loan and own a house, you could take a loan against property. You can loan Rs.5 Lakhs to 1 Crore, depending on the market value of your house. The loan tenure varies between 2 and 15 years. Both residential and commercial properties can be used as collateral. Banks could lend you up to 65% of the value of your property. However, the house must be insured. Processing fee is 1.5-2% while prepayment charges are 2-3% of the outstanding.
Upside: Lower interest rates, larger loans
Downside: Longer process of 3-10 days to get the loan
Interest Rate: 9.5-13%

Loan Against Securities:
You can pledge your shares, mutual funds, FDs and insurance policies as collateral. Incase of mutual funds and shares, banks will loan you funds equal to 50% of their value, while they will offer you up to 75% of a fixed deposit (FD). The funds are transferred into a current account from where you can access them.
Upside: Quick disbursement, lower interest charges
Downside: If portfolio value declines, you will have to put in the differential or pledge more funds/shares.
Interest Rate: 9-15%

Personal Loan:
One of the quickest options for borrowing money. You can get a loan within 30 minutes to 3 days, depending on your relationship with the bank. In fact, you might already have a pre-approved loan in your name from your bank which will make the process faster.
Upside: Quick disbursement if you borrow from your own bank
Downside: High interest rate and processing fee of 2-3%. You will also have to pay GST on EMIs. For pre-payment, a foreclosure fee of 2.5% of the outstanding amount is charged
Interest Rate: 13-24%

Loan Against Gold:
You can get 60% value of your gold and can borrow from Rs.10,000 to Rs.25 Lakhs. The tenure is usually 6 months or 12 months but you can renew the loan at a nominal charge. While you can repay part of the loan whenever you want, gold you have pledged as collateral is released only after you repay the entire loan.
Upside: You can get funds within a day
Downside: Gold appraisal charges of Rs.250-2500. If you are unable to repay loan, you will lose the gold.
Interest Rate: 10-17% banks
14-26% (non-banking financial companies)

Source:Economic Times