How to arrange money quickly if there is an emergency?
In the last post, I had shared about the necessity of having Emergency funds. As the saying goes, Hope for the best and prepare for the worst! The question arises as to how to arrange money quickly, wherein an emergency strikes, but you don’t have an emergency fund ready.
Related read: What is an Emergency fund and how to create it?
You need to define the type of emergency, as in
- The amount you will need (like it could be a sudden medical emergency or a sudden house repair)
- Define the duration of the emergency, whether it is a short-term, one-time emergency, or a long recurring one?
- Assess if the income sources are intact or not?
The first step, when Emergency strikes and you don’t have an Emergency Fund, is to look at
- Your cash in hand
- Savings in your Bank account
Since money lying in the Savings earn lesser interest, hence it is always judicious to use this amount rather than breaking your high interest yielding assets.
How to arrange money quickly for an emergency?
Assumption A: Let’s assume, if the Emergency duration is short (usually it will be short-term only), the amount required is small and your source of Income or Job is intact, then it is not advisable to break your long-term investment goals or dig into your long term / high interest yielding instruments.
If the money in your Savings account can serve your need, then you’re sorted, but what if your cash in hand and savings are not sufficient?
1. Take help from Family and friends:
According to your relations, you can prefer to take a loan from your close family and close friends. Usually, friends and family don’t charge any interest, no formal process is involved, and you have the flexibility to pay the borrowed money as per your financial stability. But ensure that the money is paid timely so that the relations are not strained.
2. Ask for Salary Advance from your Employer:
Corporates have the facility of advance salary for their employees. An Advance salary is when your employer gives you an “x” amount of your salary before the next payday. You need to ensure a good working relationship during such requests and ensure that a written and signed agreement has been done.
3. Gold Loan:
A gold loan is a very good option when you are in a dire need urgently. We Indians have always believed in investing in the yellow metal. You can utilize this gold, in the form of bars or even jewelry that has been lying ideal in bank lockers or at home. Banks and NBFC’s both give Gold loans in the range of 75%-90% of the gold value.
Reasons why Gold loans are a very good option for instant cash:
- The quickest way to get the cash (Faster processing): Gold Loan doesn’t need lengthy paperwork, and it is a safe option for banks. Hence Gold loans can be disbursed within few hours of applying for the same.
- No Income proof is required and your Credit rating is also not checked, as banks are giving you the loan against the gold value. You need not show any Income Certificate or your ITR’s or Bank statements.
- Low-Interest rates: Gold loans are “Secured loans”, hence banks charge lesser interest rates compared to other personal loans.
- Repayment Convenience: You have the flexibility of Payment options. Considering your financial situation, you can either opt to just pay interest, while the principal can be paid when you close the loan.
4. Overdraft facility from the bank:
For short term emergency situations, breaking your FDs is never advisable. Instead, take the OD facility from your bank. An overdraft facility is a kind of pre-approved loan, where the account holder can withdraw more money than what they have in their account. So, the approved money can be withdrawn as and when required. The interest is applicable only on the borrowed money.
The approved OD limit is based upon your credit history, bank balance, and your collateral value.
5. Instant Cash loans from apps:
Another best option when you are in urgent need of a quick cash loan. Since the Interest rates on Credit Cards can go really high, so one of the best options for a quick cash loan is via these “Personal loan apps“. Apps like Early Salary, Money view, Money Tap, and more, help you take quick cash loans at interest rates much lesser than credit cards.
If the Emergency duration is short, the amount required is not high but your source of Income / Job is NOT intact, i.e. you are struggling with your job / consistent cash inflow, then what?
Looking at cash in hand and Savings will always be the first option. If your Emergency needs are not met with these options, then we would never suggest you opt for any additional loan in this situation. Since you are not in a paying capacity, hence accumulating more debt, by laking loans can cripple your financial situation, as you will not be able to service extra EMI’s.
How to arrange money quickly under this situation,
- Recall any loan you have given/collect all your dues.
- Assess your short term assets: You should liquidate your assets related to short-term goals, like RD, Mutual funds, Stocks, and even FD’s (which have been created for shorter goals). Try not to dig into your retirement corpus or assets created for long-term goals.
- Relook at your ULIP’s and other policies, which are redundant in today’s world. You can choose to stop their premiums. But, ensure that you have a TERM policy and health insurance (with detailed coverages). More so, because you don’t have a steady source of income and in the case of Job-loss, your employer will not cover any medical expenses.
- If need be, you can stop SIP’s, RD, and Gold accumulation plan, if any.
- Revisit your expenses and limit your leisure / unnecessary expenses.
These assets should be capable of meeting your short-term need for quick cash and you should be able to arrange money quickly.
In case of an Emergency for a long duration, with a very high amount, you should definitely connect with your Portfolio Manager, for the right assessment.
Disclaimer: The views expressed in the blog post are independent and unbiased views of the author. This article is meant to help create financial awareness in women and financial literacy. Any financial advice will vary basis a person's real financial situation, hence it is always judicious to take any decision with the help of your portfolio manager.