All of us, at some point of time or the other, face shortage in funds and hence are not able to realise certain financial goals. Similarly, those without adequate emergency funds find it difficult to deal with financial exigencies. The only way to deal with such situations, apart from raising funds from friends or family members, is to avail loans with quick disbursals.

Here are four credit options one may consider to arrange quick funds:

Personal loan

With no restriction on end usage of funds, minimal documentation and quick disbursal within 2-7 days, personal loans have become one of the most popular credit options for meeting financial shortfalls. Some lenders have also started offering pre-approved personal loans to select consumers, especially those with existing banking relationships with the lender. Since the lender is already aware of such customers’ incomes, expenditures, EMI commitments, savings, employer, these loans have quicker disbursals.

The interest rates of personal loans range from around 10 per cent to 24 per cent per annum, depending upon the applicant’s credit score, monthly income, employer profile, job profile and other eligibility criteria. While the loan amount sanctioned can go up to Rs 30 lakh depending upon the applicant’s repayment capacity, some lenders claim to offer loans of up to Rs 40 lakh. The repayment tenure offered by most lenders range between 1 to 5 years, with a few lenders offering higher tenures of up to 7 years.

Loan against credit card

Credit card issuers offer pre-approved loans against credit cards to select cardholders, based on their spending pattern, card type, bill repayment history and other parameters of their credit profile. Being pre-approved in nature, these loans have some of the quickest disbursals among all other options. Credit card issuers usually disburse loans against credit cards instantly or within a few hours of submitting the loan application.

The interest rate of credit card loans can vary widely depending upon the credit profile of the cardholder. However, these interest rates are usually a notch higher than the personal loan interest rates offered by the same issuer to the same cardholders.

Top-up home loan

Top-up home loans can only be availed by existing home loan borrowers. While the disbursal of these applications usually takes more time than personal loans and those against credit cards, many lenders have started offering pre-approved instant top-up home loans to existing home loan borrowers. Some lenders also claim to disburse pre-approved top-up home loans within the same day of submitting loan applications.

Like personal loans and loans against credit cards, top-up home loans do not come with any end-usage restriction of the loan proceeds. The interest rates of top-up home loans are usually the same or a bit higher than those charged for the underlying home loans, which makes top-up home loans one of the cheapest sources of credit for most existing home loan borrowers.The loan amount will primarily depend upon the originally sanctioned home loan amount and outstanding loan amount. Similarly, the repayment tenure of top-up home loans primarily depends on the residual tenure of the underlying home loan, with most lenders further capping the top-up- home loan tenures at 15 years

Gold loan

Gold loans allow borrowers to meet their fund requirement by monetizing their gold holdings (in the form of gold ornaments, jewellery or coins. As most lenders disburse gold loans within a few hours of receiving the loan application, they have one of the quickest disbursal amongst all loan options. The loan amount will primarily depend on the valuation of gold deposited as collateral and the LTV (Loan-To-Value) ratio set by the lender. The LTV ratio of gold loans can vary widely depending on the lender, repayment option opted for, applicable regulatory caps. As a measure to provide relief to borrowers distressed by liquidity and income disruptions, RBI has temporarily increased the regulatory cap on LTV ratio of gold loans disbursed by banks (for non-agricultural purposes) from 75 per cent to 90 per cent till March 31, 2021.

Given that lenders have the option of selling the pledged gold in case of defaults by the borrowers, they take a more relaxed approach while approving gold loans to those with poor credit scores and credit profiles. Their lower credit risks also allow them to charge lower interest rates, starting from 7.5 per cent p.a. onwards, than unsecured loans.

Another major advantage of gold loans is the availability of wider choice of repayment mode. Apart from the usual EMI mode of repaying the principal and interest component, some lenders also offer other flexible repayment options like upfront interest repayment, monthly servicing of interest only and bullet repayment. However, when it comes to repayment tenures, gold loans are generally granted for shorter time periods, with the maximum tenure ranging between 1-3 years for most lenders.

The author is the Director of Paisabazaar.com

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