Need to take an emergency loan?

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Emergencies can occur at any time. Therefore, it becomes necessary to arrange for various types of remedies. These remedies enable us to manage efficiently during any emergency like international education or health related issues. In this article we present to you the importance of one such remedy which is the need to take an emergency loan.

Further you will learn about the various types of emergency loans you can take to put yourself in a safe position during emergencies.Emergency Loan

SECURED DEBT

In a secured debt you need to keep a security or collateral with the bank to obtain loan. There are three options available which are listed below-

Gold loans

This is a type of emergency loan which you can claim against some of your idle gold assets. Prominent banks grant gold loans at significant interest rates. You can earn maximum 60% on your gold’s value.

Loan against securities

Loan against securities enables you to obtain loan against your securities such as PPF‘s, fixed deposits & stocks. The loan amount depends on the total value of your security assets. However, securities like PPF are eligible for loans after a certain holding period of time.

Loan against property

Loan against property enables you to obtain loan against your property. You can claim for loans from 40% to 70% of your property value. The duration is normally 10 to 15 years, a little higher than other options.

It’s cheaper to obtain a secured debt. However, you must remember that in case of a default, you can lose your assets pledged against the loan.

Further you will learn about the unsecured debt options.

UNSECURED DEBT

In an unsecured debt, you don’t need to pledge any security or collateral against the loan. Following are the options available in terms of unsecured debt-

Personal loans

Personal loans are the type of emergency loans which are popular among people. This is because of its qualities such as easy to obtain & no need to pledge any property or security to obtain loan.

Credit cards

Everyone must be familiar with the credit cards. Credit cards are a good source to use them as an emergency loan with its ease of usage. It also helps you generate a decent credit score. However, all this is possible when you use your credit card within specified limits. If you use credit cards frequently you will just find yourself burdened with debts. Hence, you should ensure to clear all the dues within time to prevent yourself from the pile of debts.

Below you can browse through the interest rates involved across each type of secured and unsecured debts.

 

Type of loan

Interest rate

Gold loan 12 – 16%
Loan against security 12 – 15%
Loan against property 11 – 14%
Personal loan 14 – 25%
Credit card 25 – 50%

Conclusion

It’s important that you clearly understand the purpose before you take any loan. You should always compare factors such as rate of interest, processing fees & pre-payment penalties before you choose an emergency loan. When your loan is backed by collaterals then you should negotiate to get a good deal. Emergency loans help you to prepare & manage effectively & efficiently during emergencies which are inevitable.

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