A person may face an emergency situation anytime – be it a medical emergency, an accident, a natural or man-made disaster, job loss or anything. So, it’s utmost important to keep an emergency fund by keeping liquid cash in hand or by investing in funds with excellent liquidity.
As a thumb rule, one should keep at least six months’ salary or six months’ expenses in liquid form as an emergency fund. However, in case of severe illness requiring prolonged hospitalisation or in case of severe loss, such an amount may fall short.
In case a person fails to maintain an emergency fund or in case the fund falls short, a person may need to arrange substantial money urgently on facing an emergency situation.
So, it’s important to know how to arrange emergency funds quickly at a reasonable cost.
“There are two important factors in arranging funds at low cost – time and awareness. When you have the time to plan your purchases, you can afford to look up for products, compare prices and find what’s available at a much cheaper rate. Of course, you need to first ensure your emergency fund – either an emergency savings fund or access to a digital line of credit – is in place for all other contingencies in life,” said Anil Pinapala, CEO & Founder of Vivifi India Finance.
“Secondly, you need to research, be aware about the various options available to you for you to scan, take an informed decision and make the best choice. Look for offers – on credit cards, Fintech, Pay Later, and more. Be careful not to fall prey to unlicensed lenders; or any scheme that is too good to be true. Lastly, a better credit history will mean better loan availability. Therefore, be prompt in repayments,” he added.
According to Abhishek Soni, CEO & Co-Founder of Upwards, “For the quickest turnaround and lowest cost, friends and family might be an option.”
However, if that option does not work out, Soni suggests that you can try either of:
– availing a low cost personal loan or
– breaking any of your old FDs or
– trying to get a salary advance from your employer or
– dipping into health/life insurance if the emergency fund requirement is for a medical use case