Medical emergencies can derail even the most prepared financial plans. Having a financial safety net is vital with the increasing costs of quality healthcare. Health insurance is important but it may not cover all immediate expenses or some hospitals may not be covered under your insurance. In these instances, a personal loan can provide the timely and flexible financial support needed. The minimal documentation and quicker disbursal have made the personal loan the most popular option among borrowers.
By familiarizing yourself with the features and advantages of a personal loan stated below, you can make well-informed decisions to manage medical emergencies with financial stability better.
No security or collateral is required
Personal loans are unsecured in nature. In other words, you are not required to provide any collateral or security for availing the personal loan. The lenders will evaluate your loan application based on your net monthly income, occupation and credit score. Because of this feature, personal loan becomes a popular choice among borrowers who need immediate funds but without providing any security or collateral.
Flexible repayment
Personal loans offer flexible repayment options, providing time to manage medical emergencies and pay EMIs. The loan tenure usually extends up to 5 years. And, some lenders offer longer loan tenures. For instance, SBI offers personal loans with a 6-year repayment tenure and on Canara Bank Personal Loan, the tenures can go up to 7 years. This helps you to repay personal loans in easy EMIs. Note that defaulting on EMIs can negatively impact your credit score and therefore choose tenure on the basis of your repayment capacity. Also, note that going for shorter tenures will help you to pay off your loan quicker and thereby, incur lower interest costs. But, longer loan tenure, will reduce your EMIs, which can ease your EMI burden but would incur higher interest costs. Therefore, choose your tenure wisely.
You can use Personal loan EMI Calculators available on the lender’s website or online financial marketplaces like Paisabazaar, to know your EMIs beforehand. This can help you in managing your finances.
Quicker loan processing and disbursals
Medical emergencies require immediate funds. The increased adoption of digital onboarding has made it possible for many banks and NBFCs to disburse personal loans on the same day of the loan application. Most lenders provide instant personal loan through a 100% digital and paperless application process. This can help borrowers in meeting medical expenses faster and hassle-free. For instance, HDFC Bank claims to disburse pre-approved instant personal loans to its selected customers in 10 seconds.
Cheaper than credit cards
If you are thinking of paying medical bills or withdrawing cash from credit cards, ensure you familiarize yourself with both the credit card and personal loan features. Personal loans come with lower interest rates compared to credit cards EMI conversion or credit card outstanding unpaid after their bill due dates. Private lenders usually offer personal loans at an interest rate of 10.49% p.a. onwards, while some public sector lenders may provide even lower rates. On the other hand, credit card interest rates on unpaid balances usually start at 40% p.a., with credit card cash withdrawals additionally attracting a cash withdrawal fee of about 2% on the withdrawn amount. Although loans against credit cards and EMI conversions have lower interest rates than the finance charges on unpaid credit card bills, personal loans usually offer lower interest rates than those associated with loans against credit cards or EMI conversion options. Only those confident of repaying their credit card dues by their dates should use their credit card for dealing with medical emergencies.
Minimal to no documentation
For personal loans, lenders don’t require as much documentation as they do for home loans, loan against property or other secured loans. You are required to submit a few documents to your lender as proof to establish your residence, income and identity. In the case of pre-approved personal loans, lenders usually do not require additional documentation. This leads to less hassle and quicker processing of loan applications, which can be especially helpful in times of emergencies.
