When should you get an emergency loan?

5 MinsJan 23, 2023

An emergency does not come with an announcement. It is impossible to predict when it may occur. A crisis can result in psychological distress and financial hardship.

When should you get an emergency loan?

Having an uncertain situation can lead to stress, and not having enough funds to combat uncertainty can cause a nervous breakdown. A loan for emergencies is the best solution in such a situation.

The present financial market offers an array of loans that provide access to cash for various purposes. Several loan options are available in the market. But the most significant drawback lies in their prolonged application and approval procedures. During an emergency, these loans won't be helpful. Credit cards can offer instant credit, but they may not have a high credit limit.

A short-term emergency loan can be helpful under such circumstances. It can provide quick access to credit and requires minimal paperwork. For instance, Axis Bank offers instant personal loans online to fulfil all your financial needs.

When to get an emergency loan?

Generally, emergency loans can be used for small and urgent expenses, such as medical bills, home repairs, car repairs, school or college fees, etc. 

However, emergency loans are personal loans that can serve a variety of purposes.

Benefits of a Personal Loan:

  • Since it is an unsecured loan, you do not have to pledge collateral to get a loan.
  • Personal loans are an excellent way to fulfil short-term financial obligations without liquidating long-term investments.
  • As this is a personal loan, you can use it for many different purposes.
  • Some banks, such as Axis Bank, facilitate short-term personal loans with instant digital fulfilment. These Axis Bank loans require minimal paperwork and have a flexible tenure of up to 60 months. Existing Axis Bank customers can get instant disbursals with zero documentation. 
  • These loans usually have competitive and affordable interest rates.

[Also Read: Learn Why and How to Build Your Emergency Funds]

Factors to consider before applying for a Personal Loan:

1. Maintain a healthy credit score
A credit score is one of the most significant factors contributing to loan approval. The higher the credit score, the easier it is to secure a personal loan at low interest rates. You may still be able to get a loan with a poor credit score, but it may carry high interest rates.

2. Multiple personal loan applications
Applying for a loan multiple times or in different banks simultaneously may negatively affect your credit score. You should avoid applying for a personal loan if you have already taken one within the last six months. This may not present a favourable picture of one's financial situation to the lender.

3. Repayment time
Repayment tenure may vary from a few months to years. An extended repayment period can result in lower EMI, but it will also result in higher interest payments. Nevertheless, opt for a repayment tenure which does not exceed 40-50% of your monthly income.

4. Maintain a fair balance
  Make sure that unsecured and secured loans have a reasonable balance. A good mix of credit can positively impact your credit score. On the other hand, not maintaining a proper balance between these loans can lower your credit score.  For instance, credit history from a home loan or car loan can enhance your creditworthiness. In other words, a positive credit history for this kind of loan indicates your ability to maintain a healthy financial situation.

An emergency loan can help you combat any uncertain situations. An Axis Bank customer with a prequalified personal loan offer can avail of it instantly. The application process is entirely digital, requiring only a few clicks. Use Axis Bank’s Personal Loan EMI calculator to calculate the monthly repayment amount. You can also find out more about the interest rates on personal loans.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.