If your monthly income is Rs 20,000 or lesser, obtaining large sums of money for emergency situations/special occasions is an ordeal. And it’s just not possible to plan ahead and start saving up months or years in advance – because you never know when you’ll actually need the money.
Ideally, banks do not expect a person to spend more than 50% of their income in EMIs. So, for example, a person who earns Rs. 20,000 in a month, can spend a maximum of Rs. 10,000 as EMI while use the balance Rs. 10,000 to pay for other monthly expenses.
However, there are a number of options that you can avail that allow you to get instant cash in the form of personal loans.
This option is attractive because you don’t generally need to go through all the red tape of a bank loan to obtain cash, but since these are essentially unsecured loans provided by people you don’t know, the interest rates are generally higher.
Various Bank Loans
Only a few banks provide personal loans salaried individuals less than 20,000/-, making this a safe but a time consuming route.
AXIS, HDFC, SBI, ICICI and Punjab National Bank are the only top banks which offer credit to employees with less than Rs. 20,000/- monthly salary.
However, there are so many options to choose from and having to go bank-shopping in a moment of emergency is not a conducive scenario.
MoneyTap Credit Line
Digital money lending platforms like MoneyTap offers concise and clear loans for low salary individuals in need. Instead of shopping for personal loans, personal loans are brought to you in a click of a button using the MoneyTap loan app.
You know exactly what you’re signing up for and are also offered flexibility in repayment with the MoneyTap card – which you can use just like any other regular credit card.
Secured loans against collaterals
Another option to obtain loans would be to take out secured loans against collaterals like gold assets, fixed deposits, property and such. This would be a good option as loans obtained this way do not carry the same high interest rates as unsecured loans, but on the flip side, not being able to pay back the EMI in time could mean that you risk losing the collateral against which you have obtained the loan.
Although this type of loan appears to be a convenient fix in the short term, they may not always represent the best financial decisions in the long term.
Loans against your EPF
Taking out loans against your EPF is viable, but employees need to be tenured for at least 5-7 years before being eligible to do so. There are also particular uses like marriage, medical emergencies and house related expenses for which you are allowed to take out EPF loans – each with separate rules governing them.
Overall, though this is an option to avail emergency cash, it is ill-advised as you are essentially tapping into your retirement fund before it matures.