How to raise money for loan EMIs: Liquidate these investments or take loans against assets

Simply swiping your credit card to fund the bill is a good option when the treatment is carried out via the reimbursement route. This is because the credit card can provides you a window of up to 45 days of interest-free credit period, after which you can pay it back post receiving the reimbursement from the insurer.

But be wary of the debt soup you may find yourself in, with penalties and interest levies, should you not be able to pay off the dues on time. The revolving credit is one of the most costly borrowing options as annual interest rates can be as high as 42%. If you are not able to settle the entire amount by the due date, experts suggest that you convert your dues into EMIs, basis your repayment capacity.

Another option, if you are unable to make payments by the due date, is opting for a loan against your credit card. Various credit card companies offer pre-approved loans to customers, these can actually come in handy in this scenario. However, be mindful of the costs as the interest rate and other charges may be steeper. If you have multiple credit cards, compare interest rates and processing fees on each and go with the one that has least total cost for your preferred loan tenure.

Based on the customer's credit history and relationship with the institution, many lenders, both banks and non-banks, offer pre-approved loans to select few customers. A highlight of these loans is that disbursal of the amount is instant and you don't have to get caught up in paperwork or formalities. Now, complete digital processing of loans has further simplified matters. To check this option, head to a loan aggregator website where you can find all pre-approved options or ask your bank/s if there's any such offer against your account.

Have an ongoing home loan account? You can borrow money on an existing home loan in the form of a top-up loan. Find out if you are eligible for a pre-approved one. Again, this will be based on certain checks by the bank or non-banking lender and whether you fulfill them or not. Instant disbursement, low interest rates, long tenures and no foreclosure charges are among the key factors that make this option an attractive one.

If you haven't had too strong a credit profile or score, chances are that you will have a tough time getting a credit card or loan approved from the bank. In this case, approaching fintech lenders can help, as they offer loans even to those with low credit scores. However, they offset this additional risk by hiking interest rates. Rates are typically on the higher side of the usual range of 14-21%. Go this way only if you haven't been able to avail of cheaper options. Then, compare charges and keep two factors in mind: Go for an offer with not only the lowest interest rate but also the lowest foreclosure charges, so that you can close the costly loan whenever you have the required amount.

Many banks have started offering special personal loans to those have been infected with the virus. Examples include SBI, PNB, Bank of India and Union Bank of India, who have launched such loans at competitive interest rates and may be helpful for eligible borrowers.

For instance, SBI's Kavach Personal Loan covers expenses of COVID treatment of self and family members of the customer. Customers can avail this loan of amount starting at Rs 25,000 up to Rs 5 lakh and comes, with no prepayment or foreclosure charges. The fixed present rate of 8.5% is at least 100 bps lower than the similar unsecured product of the bank. PNB offers this loan for the salaried, self-employed and pensioners.

Also read: All you need to know about SBI's Kavach loan

If you are not eligible for these special loans, you may go for a regular personal loan, which is cheaper compared to credit card EMIs and other loans.

There are many investors who would have locked long-term FDs at a higher rate. Although you can liquidate the FDs to pay off loans, you may lose out on the interest and end up paying a premature withdrawal penalty. More than helping you, this may hurt you. The smart move here is to take a loan against it which will come at a much lower rate. For instance, if your bank FD is earning 7% interest you can easily get a loan at 8% from the bank.

Jewellery, bullion and/or existing long-term investments in the yellow metal can be pledged to raise money for. Since gold is a very liquid asset, the interest rate can be as low as 8-9%. But watch out for hidden charges and levies and note that the disbursal of loan against securities takes longer than that of a gold loan.

Your investment in stocks and shares, equity and debt mutual funds can also be used to get a loan without liquidating them. You can approach the bank with which you have a long-term primary relationship to get a loan against these securities. Your life insurance policies can also be loaned out. For example, LIC offers loans at 9% simple interest. Remember that a loan can be taken only against traditional life insurance policies, include endowment policies, money-back plans, whole life plans, and not against a term plan.

Also read: 9 investments or financial assets you can monetize to service loan EMIs