What are the available loan options for an emergency financial fund?

You’re planning your son’s marriage when you suddenly realise you don’t have sufficient funds to cover it. You’ve also realised that need to pay the premium for your insurance. Your fellow family members, who have already pitched in financially, do not have additional funds to assist you. In this case, what do you do?

For one, you can opt for a loan. Through a loan, you can opt for financial funds that will not only cover your current financial requirement but also provide you with additional funds to satisfy any unforeseen financial requirements. At the same time, you will also have a flexible repayment tenure that will allow you to pay back the borrowed funds and interest rate with ease. But to satisfy such a criteria, you have two loan options you can consider, namely the loan against property and the personal loan. Here are the differences with between the two loans and how it can work in your favour:

Processing time:

For any emergency financial situation, the first factor you need to consider is the processing time. Each loan has a different processing time, as both loans come under different categories. For example, the personal loan comes under the category of unsecured loans, wherein which, no collateral is provided. Therefore, the processing time will be short. However, with the loan against property, the processing time will be a bit longer as the lender will need to consider the collateral provided through this secured loan.

Loan amount:

Depending on your requirement, you can always opt for a loan amount that will suit your needs. Through the personal loan, you can always apply for a loan amount that is high. However, with the loan against property, you can only opt for a loan amount that is fixed to the value of the property. In other words, you are eligible to get only 70 to 80% of the value of the property. However, the lender will have the last word on how much funds you are eligible for depending on your financial profile. So this is one factor you must take into consideration.

Loan tenure:

Loan tenures differ based on the loan category one is applying for. For the personal loan, the loan tenure can last anywhere between 5 to 10 years. For a loan against property, the loan tenure can be anywhere over 15 to 20 years. While a loan tenure may bring down your EMI’s, it also increases your affordability for big-ticket loans. However, long tenures would also increase your interest payout.

Interest rate:

When applying for any loan, the interest rate is one factor you need to take into consideration. For one, it determines how much additional funds you will need to pay along with the borrowed funds. In secured loans, such as the loan against property, the interest rate is normally as low as 11 to 15 %. However, in an unsecured loan such as the personal loan, the interest rate is as high as 24 %.No matter the differences in each loan, you must consider all the available factors to know what you are eligible for, and whether it can satisfy all your emergency financial requirements.


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