While most of us resort to a personal loan due to their easy accessibility and availability, it might not always be the most effective choice. When facing a cash crunch or a time-sensitive expense, a personal loan might throw up some roadblocks such as long approval and disbursal times or simply because your credit score is not high enough to secure the loan.
Let’s take a look at other modes that can help you get funding for your emergency requirements.
Overdraft facility on debit card
Few banks offer debit cards that provide an overdraft facility through which you can withdraw or pay for a certain amount of cash even if your account balance is drained out. Again, like credit card’s cash advance facility, this facility also charges a hefty interest of one-time fee.
For example, in Malaysia, RHB is one of the banks that offer an overdraft facility on its debit cards. The facility comes without any collateral requirements and an overdraft limit is offered as per your eligibility up to RM200,000. The overdraft finance charge involved is 15% p.a.
Overdraft facility on bank account
You can always turn to your bank for any type of quick funding requirements. One way is to use the overdraft facility from your current account. If you have an existing loan with the bank, you can take an overdraft facility on that loan. However, depending on the bank’s policies and approval process, it may take a little longer to get access to the funds. Generally higher interest rates are involved in this facility.
Overdraft on your fixed deposit account
If you do not want to break your fixed deposit account prematurely, you can choose to take an overdraft facility on it. Many of the top banks in Malaysia will allow you to take up to 60% to 70% of your FD amount as an overdraft by charging interest on it. Thus, if you already have an FD account, it can be your alternative for an emergency situation without having to prematurely withdraw it and lose out on your returns.
Cash advance facility on credit cards
A credit card comes with a cash advance facility which means you can withdraw a certain amount of money from an ATM without any application or approval process involved. The amount available for cash withdrawal can vary depending on the card with some cards even allowing withdrawals of up to 100% of the available credit limit. As this facility comes with high interest rates of 18% p.a. and withdrawal fees, it should only be used during emergencies.
Secured loan or cash out refinancing
Putting up collateral of some form can definitely help secure a loan. With cash out refinancing you can use your home as collateral and secure the required equity. This helps you secure a larger amount of financing and can come with lower rates of interest. The downside to this option is that it could take a longer time for the loan to be approved and disbursed.
Payday loans are basically short-term cash advances made with an agreement of paying them back when the next paycheck comes in. These are the relatively smaller amounts offered for shorter tenures but come with a relatively higher interest rate. Do make sure to pay the monthly instalments on time as they can come with high late payment fees as well.
Remember to keep your credit score in check such that any urgent requirement for cash can easily be met with one less obstacle in the way. While these options can definitely help tide over any financial crunch, ensure you keep up with your payments and borrow only what you need to prevent your debt from racking up.