Cash-strapped patients with Covid can consider loans
In a health emergency, speed of disbursement is more important than cost
Even if you have a health insurance policy, you should carry a considerable amount of cash when checking in to a hospital for treatment. The insurer’s approval for cashless treatment may take time. In the meanwhile, the hospital could ask you to pay some amount upfront to begin treatment.
You may also need cash if your policy has a small sum insured or if for some reason you are forced to go to a non-network hospital. If you need to raise money in a hurry, here are a few sources you can turn to.
Swipe your card:
Most big hospitals will allow you to do so. But the interest rate on revolving credit can be 30-49 per cent. To reduce cost, opt for debt consolidation, or merging the loan into a low-cost loan (like a top-up home loan).
Personal loan:
If the loan is to an existing customer and within the pre-approved limit, it can get approved instantly. “This facility is usually available to customers who have a longstanding relationship with the bank,” says Deepesh Raghaw, founder, Personal-finance-plan, a Securities and Exchange Board of India-registered investment advisor. In the case of new customers whose KYC was done digitally, approval can come on the same day. Where physical signature is required, it can take a couple of days. The interest rate can range from 9-26 per cent (usually around 16-19 per cent).
Pledge gold:
If you are emotionally attached to your gold and want it back, go for a gold loan. “Most lenders disburse it within a couple of hours of submitting the application,” says Gaurav Aggarwal, director, Paisabazaar.com. Since these loans are backed by collateral, lenders can lend even to those who have poor credit scores, and at lower rates of interest. They offer multiple repayment options.
The rate of interest can vary from 7-29 per cent. “The interest rate depends on the purity of the gold and on the customer’s ability to repay. Lower the ability, higher the rate,” says Pandya.
Be wary of one point. “If a correction in price leads to the loan-to-value (LTV) ratio exceeding the regulatory cap, lenders may ask borrowers to deposit cash or cheque, or more gold within a stipulated time. If they fail, their gold could be sold,” says Aggarwal.
Loan against security:
This loan can be given against an insurance policy, mutual fund, demat shares, fixed deposits (FD), and so on. “Banks and insurers allow loans against other policies but not against ULIPS and term insurance,” says Adhil Shetty, chief executive officer, Bankbazaar.com.
The interest rate is lower than on a personal loan. Says Shetty: “The loan amount can range from 60-90 per cent of the surrender value of an insurance policy, 80-95 per cent of an FD, 50-70 per cent of the share or mutual fund value, and so on.”
Securities can also be sold to get the full value (not just the LTV). If you sell shorter-duration debt funds, you can get the money in T+1 nowadays. In most other categories it takes T+3. “If your need for money is temporary and you are confident of repaying, take a loan instead of selling,” says Arnav Pandya, founder, Moneyeduschool.
Avoid withdrawing from EPF:
This money, meant for retirement, should be withdrawn as a last resort. The Employees’ Provident Fund Organisation says it disburses the money in 72 hours. “Earlier, if you withdrew money, you could deposit it via Voluntary Provident Fund. But now, with interest income on deposits above ~2.5 lakh becoming taxable, this has become difficult,” says Raghaw.