Running out of money? Here are 5 ways to organize low cost funds

Even if you have to go for a personal loan, choose a lender with the lowest IME per lakh.

Many people face a cash shortage and struggle to make ends meet. Job loss, wage cuts and declining business income after the Covid-19 epidemic have impacted the finances of many people. To add to the misery, hospitalization due to the coronavirus has again pushed many people into further debt. To get money quickly, many people borrowed from friends, relatives and neighbors.

Although personal loans are readily available, they can be expensive, especially when lenders are reluctant to provide loans. Personal loans are available from around 11% and can go up to 18% as they are unsecured in nature. There might also be processing fees and other fees built into the loan offer.

Even if you have to go for a personal loan, choose a lender with the lowest IME per lakh. Ask for the required documents, approval formalities and how long will it take them to credit your bank account with the loan amount. Most banks and NBFCs offer digital loans which are basically personal loans. Some of these may be pre-approved loans and may require little or no documentation. Keep an eye out for processing fees, foreclosure fees, etc. before finalizing them. They can be good sources for organizing funds, but there are also alternative options that can be explored. Here are a few.

Salary discovery

As a salaried employee, you can obtain an overdraft facility (OD) of up to three times your salary from the bank. The OD facility is typically 12 months, and you only need to pay interest on the amount you use and for the length of time you use it.

This is a non-EMI product and you only need to pay interest each month. At any time, you can ban the installation of OD without penalty or charge. This function is easy to activate, does not require any documents and guarantees money in your account in record time.

Payday loans

A payday loan is a loan that you can avail of until your next payday is credited to your account. These are short-term loans when there is a shortage of funds for a short period. Typically, the payday loan is a lump sum loan, meaning that the total loan amount and the interest due will be automatically deducted from the customer’s bank account the next month after they use the loan. .

Loans Against FD

If you or your parents have a fixed deposit in a bank, you can opt for a “loan against FD”, without having to break the deposits. The loan can be used for an amount of up to 85 percent to 90 percent of the value of your deposit. It can be used both as a loan or an OD.

Covid loan

For those who test positive for Covid-19 on or after April 1, 2021 and need cash to meet medical bills related to treatment for the coronavirus, the State Bank of India has launched a loan offer for those who hold a bank account with them. The loan can be used by the bank’s customers who can be salaried, non-salaried or retired. There will be no collateral to qualify for the loan from the bank.

Mutual fund loan

If one is faced with a short-term cash shortage, securing funds against mutual fund investments can provide some relief. Some banks have a facility that allows mutual fund investors to obtain a loan by pledging their holdings in mutual fund debt and equity programs. The investor does not need to sell the MF units and the loan used is in the form of overdraft (OD). In an OD type loan, interest is only paid on the amount of the loan used and not on the total amount of the loan.

Plus, you can take out a loan against gold jewelry, an insurance policy, or even your residential or commercial property if you have it. The loans against them are unsecured in nature because you will be providing collateral and therefore the interest rate there is usually lower than that of a personal loan. You can negotiate with the banker and the NBFC not to keep a foreclosure fee in the loan agreement and try to prepay the loan as funds become available from your own sources.

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