We all need emergency funds in our life. We never know when we need it but we all know that we need it some time or other. There was a detailed post on CNN some time back on how to get hold of emergency funds when we need them. I have adapted it to the Indian context since a lot of avenues that we have a are very specific to personal financing in India. So without much ado here is my list.
- Tap emergency funds : You did save for the rainy day somewhere didn't you? This would be the right time to start using it. If you have not started doing this as a habit. It might be worth doing something like this after you get out of this crisis. So what is next, let us look forward.
- Sell long term equity investments : Long term equity investments are investments over a year's timeframe. They have most probably given you handsome returns given that stock market has done well for quite some time now. So far the sources of emergency funds that we have looked at were
- Ask parents for a gift : If your parents were planning to give you a gift in cash / money, this would be a good time to do it. Gifts from parents wont be taxable and would help you tide over the current crisis.
- break into a FD : Fixed deposits can provide the next level of quick access to money that comes with some penal interest for early withdrawal. You probably wont lose the principal but definitely a large portion of the interest when you do this one.
- Take a loan on Jewels : Jewel loans are not a pawn broker domain anymore. Many banks will help you with a jewel loan. All that jewelery you have lying around in a locker can actually come in handy. Talk to your bank and close the transaction right there from your locker to the banker's locker. Gold has in recent times appreciated well so this option makes it even more worthwhile.
- Borrow on your PPF : Your public provident fund could be a good source of income from the third year onwards of establishing the account. The loan amount
should not exceed 25 per cent of the balance in your PPF account at the end
of the preceding financial year. - Loan against shares : This is an option that comes with specific risks. If the stock under lien goes down in value, the institution providing the loan will automatically liquidate it and you will be responsible for tax implications on the same. This option also has a higher cost associated with it as compared to some of the previous options.
- Loan against property : If you hold property that is not in lien already , then you can go for a loan against property. This is low on our options list since this option is probably going to take some time to work and not exactly going to help in an emergency situation.
- Personal loan : The ubiquitous personal loans with their so called low rates are your next best option if you have reached down so far in selecting a source for your funds. There are quite a few options available but none of them can be qualified as cheap. The costs are just "structured" well so you can never find them :)
- Cash advance on your credit card : You got to be kidding right? This is really not a real option given the cost of this loan.
1 comment:
Nice choice of subject. I have gone through this about year and half back. After putting most of my money in buying my house, I realised that I will have to spend another 5 lakhs in doing interiors.
Though the banks advertise about loan against shares/mutual fund etc. When you really want it, it is not so simple. In my case, banks declared that they have reached to limit for advances under this category, so I will have to wait for a month or two. Same thing about loan against car.
My house is already mortgaged, so no question of borrowing against it.
One thing that is quick and safe is to check your employer's policies. It may be possible to take advance salary or get amount declared for LTA that you are anyway not likely utilise when you have funds problem. Additionally my employer has scheme where I can buy equipment or furniture upto certain amount in the name of company and with company funds. A small portion of my CTC goes to repay this over 5 years.
With some help from wife and a small personal loan helped to somehow reach my budget.
btw, whatever they say about just payslip for getting personal loan, they need lot more documents. Payslip might be good for sanctioning the loan, but it takes many more to get it disbursed.
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