The current financial scene is flooded with numerous loan products that give instant access to cash for all your needs. Though there are many loan products available in the market, the biggest drawback is that they all take a considerable amount of time for the application process and approval. These loans do not come in handy during emergencies.
Credit cards do give instant credit to the users; however, one may not have a high credit limit. Then there are some types of loans that require enormous paperwork and ask you to submit collateral or guarantee to disburse the loan at a short span of time.
Emergency Loans can come in handy in such situations; they equip you with the much-needed credit within a short span of time and with less paperwork and administrative requirements.
What are Emergency Loans & How do they work?
Emergency Loans are low quantum cash loans that are dispersed immediately through banks, NBFCs and other online lenders. Emergency loans come in handy when you need quick cash to meet an emergency. These loans are primarily utilized for things like medical emergencies, home repairs and renovations, vacation plans, short-term educational training courses, and many other needs.
With Emergency Loans, you can get loan amounts ranging from Rs.5000 up to Rs. 5 lakhs.
The repayment tenure ranges from 30 days up to 90 days.
The interest rates start from 0.1% per day.
Additional Reading : 5 Emergency Loans that Come to the Rescue of borrowers with Bad Credit
Popular Types of Emergency Loans in India
- Cash Advances on your Credit Card
- Payday Loans
- Home Equity Loans
- Loans against your Insurance Policies
- Bank Overdraft Facility
- Short term loans against your bank FDs
- Bridge Loans
6 Ways to Get a Loan in an Emergency
As mentioned above, there are different types of Emergency Loans.
- Cash advances on Credit Card: These cash advances can be availed through your credit card account login. You can also just use your credit card to withdraw cash from an ATM. The withdrawn cash shall be added to your monthly credit card statement with the applicable charges. Some credit card companies run regular offers on cash advances. You might have to call the customer care of your credit card company to know more about such offers and how to avail them.
- Payday Loans: Payday loans have become very common these days. There are a number of online lenders who process these payday loans without any hassle. One can just log in to their website, enter their details and check their eligibility for these loans. The application process is also very simple. You will be required to fill in your personal particulars, your salary details and upload some supporting documents. The verification is done instantly and the loan amount is disbursed to your bank account immediately. Some service providers even offer you a virtual credit card to utilize the loan amount.
- Bank Overdraft Facility: This facility is offered upon special discretion of your bank based on your account standing. You can check with your bank on your eligibility. Upon approval from the branch manager, the overdraft limit is activated on your account. This is solely under the discretion of your particular branch. It depends on your financial standing and your personal relationship with a particular branch.
- Loans against your insurance policy and FDs: This facility is available in most banks and NBFCs. You can walk into your branch, submit your policy documents or FD details and check your eligibility to get Emergency loans. The loan amount shall depend on the value of the documents you are pledging.
- Home Equity Loans: This loan is like a top-up loan against your existing home loan with a particular bank. Since you have an existing loan with the bank, this emergency loan will not require much paperwork and verifications. This loan again depends on your financial standing and the repayment history of your existing loan. Hence, if you have a good relationship with your bank branch, you are at an advantage of landing a better loan amount and good interest rates.
- Online Lenders: If you’re looking for a quick loan with minimal documentation, then an instant personal loan from an online lender is the best way to go forward. digital lenders do not require you to submit extensive documentation and the entire process is online. fill up the loan application form, upload the necessary supporting documents and the sanctioned loan amount will reach your bank account within 24 - 48 hours.
Why should you opt for Emergency Loans & When should you choose them?
There are various advantages over opting for Emergency Loans;
- Processed and disbursed quickly – Emergency loans need very less paperwork and are hence processed quickly and the amount is deposited to your account within a matter of hours. This allows you to take care of your financial needs at the earliest.
- Convenient application process – Most of the emergency loans these days are applied and processed online. The process is very simple and can be completed in minutes. This saves a lot of time for the applicant during time of emergency.
- The credit score is not an issue – Emergency Loans don’t scrutinize your credit score much. This allows individuals with bad credit scores also to apply for these loans. In fact, with emergency loans, if you make the repayments on time, you have a chance of building your credit score.
The question now is,
When should I go for an Emergency Loan?
Though Emergency Loans look lucrative, they come with high repayment costs. The interest rate on these loans is quite high and they also charge a hefty processing fee and other charges to process the loan. Therefore, one should opt for these loans only in times of absolute emergency. Some of the instances to opt for an Emergency Loan could be:
- Medical emergency
- Urgent maintenance required for home
- To pay for some invoice urgently in your business
- To meet some unexpected expenses while on a vacation
Common Eligibility Criteria to get Emergency Loans
Though Emergency Loans are disbursed without much ado, they do set a list of basic eligibility criteria to apply for this type of loan:
- Minimum 21 years of age
- Should possess PAN Card
- Minimum income of Rs. 10,000 per month
Documents Required to Apply for an Emergency Loan
- Identity proof like PAN card, Aadhaar card, Driving license or Passport
- Address proof like Passport, Rental agreement, Utility bills like a landline, water, or electricity connection
- Income proof like salary slips, bank statement or Form 16
A Word of Caution:
Emergency Loans are a good option when you are in absolute need of cash for legitimate emergencies. However, they come at steep interest rates and can deepen your financial crisis if you don’t manage them prudently. So, go for them only when you have exhausted all your other options.