New-age FinTechs in India understand that employed Indian individuals have the ability to consume credit and repay but do not have access to the right product.
One can never predict when a financial crisis will hit. The COVID-19 crisis has disrupted the financial wellbeing of the working-class across the world. Especially those without financial support or savings that they can rely on during such times. Having an emergency fund of at least three month’s expenses should be the golden rule to prepare to deal with a crisis without the stress of immediate cash needs. As it might not be possible for everyone to shore up savings, a quick loan will may be the only option but carefully weigh your options and choose the best possible way to get through your emergency. Here are a few options for those who are looking for some emergency financial assistance:
Get a Line of Credit
Credit line or line of credit is a type of unsecured loan that comes handy for people who need small financial aids on a regular basis for short spurts of time to manage their emergencies. New-age Indian FinTech companies are working to alleviate this short-term emergency cash crunch by giving individuals a small credit limit, even if you do not have a credit score or a bad credit score. Borrowers can draw upon cash instantly when in need and repay when they have excess cash, all for a small fee and all this done in private on their smart phone and the privacy of their homes or offices. Timely repayments and good repayment behaviour improve credit access & scores and hence are becoming an instant hit with the under-banked and unbanked!
Unlike fixed-term and fixed EMI loans like personal loans, the line of credit or credit line is an EMI free product which enables the user of the credit line to plan their finances and repay within their comfort zone. In this loan, an individual can borrow any amount within their approved credit limit and repay in parts of full whenever they have access to money while paying interest and / or fees only for the time that they have access the credit line. The best part of this product is that the credit line continues to be available to the borrower if they should need access to money in short-notice and to meet any kind of cash emergencies like unplanned dates to medical emergencies.
While banks offer this product to the “super prime” – customers who have fantastic credit scores, live in tier I cities, employed by the biggest employers etc, a few of new-age Indian FinTech NBFCs are upping the game by looking to truly achieve inclusion. While most of the FinTechs still convert each draw of the borrower in the credit line into a 3 or 6 month EMI product, there are a handful of FinTech’s are pushing the boundaries and offering a true EMI-free credit line to their borrowers.
Get a Personal Loan
A personal loan is an unsecured longer-term but fixed-term loan offered for a specific purpose. Typically for higher loan amounts that you can repay over a longer-period of time with a higher interest repayment. These types of loans are good for a single use but with the longer-term repayment, usually cause a dent in your monthly cash availability. It is important to understand that while loans as such provide a sense of security, they might nudge you towards overspending your salary and thereby having to rely on using the credit. It is important to discipline your spending.
Loan against credit card or Advance cash from credit card
While credit cards solve this need for many, only 4% of Indian population has access to them while the rest have traditionally relied on other sources as listed above. In case of emergency funds, you can apply easily for an instant loan against your credit card but always know that this is the most expensive form of credit available. Credit cards often charge cash advance fees, interest and other charges for any cash advances or unpaid credit. Even if this was the only option, credit card companies have a lot of conditions that you must fulfil before getting this option. This option is typically limited to people at a high-income or high credit.
Borrowing from colleagues, friends or family
Credit should be private matter and an individual in need must not be going from one possibility to other explaining their situation and putting themselves in paths of discomfort and embarrassment. Asking your colleague or friend or a family member is the most embarrassing situation and if denied because they do not want to give or are unable to give as they are cash strapped too will cause you to run from pillar to post. To feed an emergency, this should be your last option after exhausting all other options listed above in the order mentioned.
New-age FinTechs in India understand that employed Indian individuals have the ability to consume credit and repay but do not have access to the right product. The one-size fits all approach, read Personal Loan, have kept this large group of individuals reaching out to their friends & family for short-term loans during emergencies. These financially able but stressed consumers have the ability & intent to repay but needed a flexible product that fits their immediate need and short-term cash stress; hence the credit line is the best possible product to deal with emergencies. It also helps that the borrower has access to the principal repaid in real-time, they can rest assured that their credit needs are taken care.
Source: Business World