Emergency Medical Loan: Are You Facing a Medical Emergency? Here are 10 quick loan options
Many think that health insurance can help with such medical emergencies. However, with medical costs skyrocketing, in many cases health insurance will be insufficient and such people will remain a pillar of raising money.
To prevent such a situation, take a look at the options for emergency financing beyond health insurance coverage.
Health insurance is not a panacea
While health insurance can be very helpful in many cases, there are several scenarios in which you will have to spend a lot of money out of your own pocket.
“The final amount of damage to a health insurance company can be significantly lower than the total hospital stay or treatment costs of the insured person. This may be due to the specifics of the insurance policy, such as rents and different floor levels for health treatments and procedures, “says Naveen Kukreja – CEO and co-founder of Paisabazaar.com
“In the case of Covid 19, the government had capped treatment costs and health insurers were unwilling to pay beyond that. Even so, private hospitals charged a lot more and therefore in many cases people had to” spend 40-50% of their expenses out of pocket, ” although there is health insurance with sufficient insurance, “says Rishad Manekia, founder and managing director of Kairos Capital, an investment advisor registered with SEBI.
Another critical aspect is access to a cashless network hospital. For example, if the most convenient cashless hospital is for a Covid hospital and you have a non-Covid medical emergency and it is difficult to decide on the next best cashless network hospital, you may need to go for a non-network -Hospital decide hospital and pay all costs out of pocket. You have to take the reimbursement route, which can take weeks to get your money back.
Whether or not you have insurance, if you need emergency funds, the top priority in such a situation is to choose a route that gives you quick access to funds. Here are 10 options in order of time to access money.
1.When credit card works best for you
“For those with a credit card, the quickest medical emergency funding option would be to swipe their credit card and then pay back the costs by the due date of their next bill. Paying the entire credit card bill by the due date would save you from having to pay the high interest costs in the form of credit card financing fees, “says Kukreja.
Remember that a credit card revolving loan can be one of the most expensive loan options if you cannot pay the fees on time, as the annual interest rates can be up to 42%. “This must be done with the utmost caution as there must be enough funds to pay off the debt and the funds must be available before the card is due for repayment because if the debt is not paid it can become excessive Penalties and interest charges that can turn up quickly, “says Manekia.
This is a good option if the treatment is reimbursed as the credit card gives you a window of up to 45 days of interest-free repayment period after which you can repay it after receiving the reimbursement from the insurer.
However, if you are unable to pay the full amount by the due date, it is better to convert your fees into EMIs. “Credit card holders who are unable to repay their entire bill by the due date can convert all or part of their bill into EMIs according to their repayment ability. The duration of such EMI conversions can be up to 5 years and their interest rates are significantly lower than the financing fees for unpaid credit transactions, “adds Kukreja.
|Loan options for emergencies|
|Credit type||Estimated time of payment||Interest rate (% pa) *|
|Private loan||2-7 days||8.90% -26%|
|Loans against FDs||Immediate||Up to 2.5% above the FD rate|
|Credit card**||Immediate||23% -49% ^|
|Gold credit||Same day||7% -29%|
|Securities Lending (LAS)|| Can take a day or more
(Some lenders offer instant LAS)
|EPF advance|| For Covid progress: 3 days
For others: up to 20 days
* This is just a wide range. Interest rates can be offered at a lower or higher rate.
** Credit card financing fees apply only to ATM withdrawals and unpaid components of the credit card bill
^ IDFC First Bank charges financing fees from 9% pa
Data as of June 21, 2021,
2. Credit versus credit card
If you are certain that you will not be able to repay the full amount by the due date, a loan against your credit card may be a better option. Many credit card providers offer their customers pre-approved loans that can be useful in such a scenario. “These are pre-approved loans and are usually paid out within a few hours of applying for the loan online,” says Kukreja.
However, you need to be careful of the cost as the interest rate and other fees can be higher. If you have multiple credit cards, compare their interest rates and processing fees and choose the one that has the lowest total cost for your preferred repayment term.
3. Fintech loans are simple but expensive
If you are having trouble getting a credit card or loan approved by a bank, you can turn to a fintech lender. These companies also offer loans to people with low credit scores.
“Fintech companies tend to be less strict about evaluating personal loan applications than large banks and NBFCs. These companies can approve personal loan applications that would otherwise be rejected by large banks and NBFCs due to a lower credit rating or risky credit profile. Higher credit risk, these fintechs typically charge significantly higher interest rates on their personal loans, “says Kukreja.
The interest rate for most borrowers is usually in the upper end of a typical range of 14-21.48%. Only opt for this route if other cheaper options don’t work for you. When choosing the loan, it is better to compare the fees and go for the one with not only the lowest interest rate but also the one with the lowest foreclosure fees so that you can close the costly loan when you have enough money.
4. Pre-approved instant loans
Based on the credit history and banking relationship, many lenders, both banks and non-banks, offer pre-approved loans to a limited number of customers.
“While personal loan disbursements take anywhere from 2 to 5 days after application, pre-approved personal loans offered by banks and NBFCs can be disbursed almost instantly. Many banks have developed capacity for end-to-end digital processing of their personal loans, which has enabled these financial institutions to speed up their personal credit assessment and disbursement processes, “says Kukreja.
To check out this option, you can go to a credit aggregator website that has all of the pre-approved options in one place.
5. Pre-approved home loans with instant recharge
If you have an active home loan account, don’t forget to check your eligibility for a pre-approved top-up loan. “Many lenders have begun offering their existing home loan takers pre-approved instant top-up home loans that claim disbursements the same day after the loan application is made,” says Kukreja.
While you are pre-approved, you can get the loan quickly and it comes with one of the lowest interest rates, the longest term, and zero foreclosure fees.
6. Covid special loan
Many banks have started offering special personal loans to those infected with Covid-19. Banks such as SBI, PNB, Bank of India, and Union Bank of India have issued such loans at competitive rates and could be a good option for suitable borrowers.
For example, SBI’s Kavach personal loan covers the cost of COVID treatment for the client’s self and family members. Customers can avail of this loan from Rs 25,000 up to Rs 5 lakh and has an 8.5% interest rate and no prepayment or foreclosure fees. Click here to learn more about SBI’s Kavach Personal Loan.
If these special loans do not work in your case, you can opt for a conventional offline personal loan. “Remember, personal loan interest rates are typically lower than credit card-EMI conversions or credit card loan rates offered by the same lender. Therefore, those who have medical emergencies should also contact their existing lenders and the online financial marketplaces to find out about the various personal loan options available on their credit profile, “Kukreja adds.
Fastest Secured Loans
If you’re short on time to arrange emergency funds, unsecured loans are the quickest way to go. However, when you have some time to spare, secured loan options can come in handy.
7. Loans against FDs: There are many investors who would have locked long-term FDs at a higher interest rate and if they want to liquidate those FDs they will lose interest and pay an early repayment penalty. If instead you have a bank FD with a good interest rate, it will be better for you to take out a loan against it, which comes at a much lower interest rate. For example, if your bank FD earns 7% interest, then you can easily get an 8% loan from the bank.
8. Gold credit: “Those who cannot take out a personal loan can pledge their gold jewelry or existing long-term investments to finance medical emergencies. While gold loans are usually paid out on the same day, securities loans usually take longer to pay out, ”says Kukreja.
Loans against shares, MFs and insurance: Your investment in stocks, mutual funds, and life insurance can also be used to take out a loan without liquidating them. You can contact the bank that you have a primary long-term relationship with for a loan against these securities.
10. EPF feed
You can receive a non-refundable advance on your EPF corpus up to your 3-month base salary (including DA) or 75% of the total credit on your EPF contributions, whichever is lower. Although the EPF has a window of 20 days to pay out the advance, automation has helped pay out the advance within 3 days.
While most experts don’t recommend using your retirement savings during an emergency, if you have no other option to work, this could be a last resort.