Even though an emergency fund of at least 3 months' expenses is a must to deal with a crisis, it might not be possible for everyone to hold up such savings. Under such circumstances, a quick loan comes out to be the only option.
We never know when a financial crisis will hit. The COVID-19 crisis, for instance, has left the financial wellbeing of the working-class across the world disrupted, especially those without any financial support or any contingency savings to rely on during such times.
Even though an emergency fund of at least 3 months’ expenses is a must to deal with a crisis, it might not be possible for everyone to hold up such savings. Under such circumstances, a quick loan comes out to be the only option. However, experts say, one should be careful and should weigh their options and then choose the best possible way to get through.
Here are some options to help during a financial emergency;
Take help of Line of Credit
This type of credit known as a line of credit or credit line is a type of unsecured loan that is ideal for people who needs small financial aids regularly. This is especially for those who need a loan for the short term to manage their emergencies. Various Fintech platforms now offer such short-tenure small credit limits, for an emergency cash crunch. One can also get this form of credit even without a credit score or a bad credit score.
With the help of a credit line, one can borrow cash instantly when in need and then repay it, all for a small fee. Industry experts say timely repayments and good repayment behaviour could also improve the credit access and credit scores of the borrower.
Depending on the loan provider, one can borrow any amount within their approved credit limit and then repay the amount in full or in parts when the borrower has cash available. The borrower needs to pay interest or fees only for the time he/she has access to the credit line. Additionally, if needed in the future, the credit line continues to be available to the borrower to meet any kind of cash emergencies.
Getting a Personal loan
Similar to the credit line, a personal loan is also an unsecured loan. The difference is, personal loans are usually for longer-term and fixed-term loans offered for a specific purpose. Personal loans have opted for higher loan amounts that one can repay over a period of time ranging from 1 to 5 years or 12 to 60 months. The interest rate of a personal loan also comes with a higher interest.
Loan or advance cash from Credit Card
In case of emergency funds, one can apply easily for an instant loan against his/her credit card. Having said so, experts say all borrowers should be aware that credit cards are one of the most expensive forms of credit available. Credit cards usually charge various fees such as cash advance charges, interest and other charges for any unpaid credit. Even though the loan is easily is available through a credit card, only 4 per cent of the Indian population has access to them.