Medical emergencies can strike when you least expect them. These are doubly devastating from a financial standpoint; apart from medical bills, you may also face financial hardship simply because you are unfit to get back to work.
If your mind immediately jumped to road accidents, those aren’t the only medical emergencies you may face. Debilitating illnesses can put you out of commission as well, and can mess with your ability to work and earn.
It’s very easy to take a rushed, unadvisable financial decision during such times, but that will only leave you in even hotter water.
Here’s what you can do when such an unexpected event occurs.
What to do when emergencies strike
Picture this: you’re the breadwinner of the family, and have worked hard to be financially stable. You’re juggling expenses, loans, and bills when suddenly, you get involved in an accident. At the hospital, after you get the huge bill, you’re told that you need to recuperate and can’t return to work for at least two months.
This is an all-too-familiar story, and inevitably leads to panic and unwise spur-of-the-moment financial decisions. The key to handling an unprecedented financial crunch is to keep a calm head, and look at all the options on your plate.
The options at your disposal
When faced with the financial crisis brought on by a medical emergency, you can opt for a personal loan to tide over the expenses till you regain financial stability. When going for a personal loan, you have two options: secured loans (where you need to provide collateral), and unsecured loans.
Let’s take a look at some of these.
Personal loans you can find online
These are unsecured loans, which means you won’t have to pledge any of your property or assets as security. You can simply pick one of the personal loans India has to offer through various financial institutions. With the rise of online banking, this process can be as easy logging onto a lender website and filling out an application form.
Personal loans cover a number of situations such as urgent trips abroad, education expenses such as school admissions, cash-strapped situations, and yes, medical emergencies as well.
Using one of the online personal loan portals, you can utilise advantages like quick online approval (sometime within minutes), attractive loan interest rates, minimal documentation and online EMI Calculator for personal loan.
Another way you can use unsecured loans to help with financial strain is through a credit card. Simply apply for a credit card and use it to clear your bills until you’ve figured out how to become financially stable again. You can usually postpone credit card bill payment for a few months, but be wary of the high interest rates and the potential damage to your credit score.
However, you need to know that not everyone has easy access to unsecured loans. In fact, lenders assess potential borrowers on the five C’s of credit—character, capacity, capital, collateral, and conditions—for creditworthiness. The first four are a measure of your willingness and ability to repay any loan you receive, while the last one refers to your financial condition and other general economic factors.
Secured loans against property
No, it’s not only your house or land that you can pledge as collateral for a secured loan. A number of people have the tendency to invest in gold. In times of an emergency, you can simply borrow money against gold jewellery you may have accrued.
These loans are usually preferred because they don’t need a large number of documents as proof, and because the lenders don’t charge any processing fees. Even when certain banks bring up a processing fee for a gold loan, you can usually get them to waive these off with some persuasion.
Once you’re back working again, you can get your precious jewellery back by simply repaying your loan.
Secured loans against assets like mutual funds
If you’ve made the smart move of investing in mutual funds—or bonds, fixed deposits, or even insurance policies—you can simply apply for a secured loan against these. You won’t have to liquidise these assets; you can simply list them as collateral and apply for a loan against their value.
Getting a loan in this manner is advisable too; you get access to much better interest rates than with unsecured personal loans.
Saving is caring…for yourself!
It’s always great to have a ‘Plan B’ when it comes to managing finances, and this is especially true when you face a financial crunch due to unforeseen medical emergencies. Most financial planners suggest putting aside an amount equivalent to 6 months’ pay.
While it’s true that many medical insurance policies can take care of most hospital visits, some coverage plans won’t help you with regular expensive tests and consultations. And if your condition has deteriorated to a point where you can’t work, you could face a serious cash shortage.
In this context, the ideal savings amount can vary; for instance, you need to take into consideration the number of earning members in your family, and your job security.
The next logical question is where to put the loaned amount. Planners suggest putting at least 25% of the entire amount in a savings account. Using a debit card, you will be able to make withdrawals 24/7 and comfortably pay off any bills. Ensure you have a big enough cash withdrawal limit though; you don’t want that little factor causing you problems when you’re trying to clear medical expenses and the like.
Ideally, always being financially prepared is advisable; however, in case a medical emergency strikes when you least expect it, you know the options at hand. Choose wisely to minimise the effects of a financial crunch.