Third Covid-19 wave looming: Ways to remain prepared to raise money in emergency

The second wave of Covid-19 that devastated the country is somewhat behind us, but already there is talk of a third wave of hitting soon. Health emergencies are one of the biggest reasons for the requirement of money and can cause immense financial stress. Even if there is health insurance, individuals may have to run from pillar to post to organise funds to pay for immediate medical expenses. There may be many other such situations where one needs such quick money and one needs to be prepared to raise funds quickly.

“There is no question that the pandemic has led to an urgent need for liquidity. With the pandemic situation evolving rapidly, it is extremely important for investors to build a pot of money in a safe place to ensure they can meet emergency situations without having to urgently rely on any form of high-interest financing,” Ankit Agarwal, Managing Director, Alankit, said. Here are some of the ways you can raise money in a hurry:

Unlocking fixed deposits

While your friends and relatives can always chip in, you should have to think of liquid assets which can be quickly converted into cash. The old thinking was to have gold and gold ornaments at home. Gold is no doubt the most liquid asset. You can sell it readily or pawn it to borrow. However, this may not be so easy in these times of repeated restrictions of movements and lockdowns. Instead, financial assets can be used to raise money.

Bank fixed deposits and liquid funds can be converted into cash. Bank fixed deposits can be broken into cash in almost no time. “Fixed deposits can be liquidated easily and are a good source of quick money when in need.  During emergencies, one can even consider taking an overdraft against a fixed deposit to access funds,” Aditya Damani, Founder, Credit Fair, pointed out.

Liquidate liquid funds

Some mutual funds allow instant credit of up to Rs 50000 or 90% of units of liquid schemes, whichever is lower. Otherwise liquid fund redemptions are credited into the bank account on the following day, if you redeem the units before the threshold time.

Other funds and stocks

If you sell your bond funds and equity funds it will take up to 3-5 business days for the money to reach your bank account. Select brokers offer to credit your bank account within half an hour for delivery sell trade.  Selling units of ETFs can give you money faster than the open ended equity funds.

However, if you have an equity portfolio, you can get liquidity faster. When you sell shares on the stock exchange, the proceeds hit your bank account in two business days from the trading day.

“While investment assets are valuable possessions that can be converted into cash, however, it is obvious that all of your assets cannot be sold for cash instantly or without taking a loss on the sale of the asset,” Agarwal cautioned.

Loan against securities

When you do not have financial assets that you can capitalise, you can also look for borrowing options. You can raise money against gold within hours from non-banking finance companies. Loan against units of mutual funds and shares is also a quick solution if you hold them in a demat account which is held with the lending bank. The bank can help you mark a lien on the units of mutual funds and shares and extend up to 60 to 70% of the value of the underlying.

Though banks are comfortable offering loans against national saving certificates and life insurance policy, these may not be super quick. Procedural requirements may be long. You may have to spend more than two days to assign the same in the favour of the lending bank and complete the paperwork.

Take unsecured loans

In desperate situations, personal loans and loans against credit cards can be explored. These are disbursed fairly quickly but come with a high rate of interest compared to secured loan options such as loan against ornaments. As far as possible avoid withdrawing cash on credit cards. It attracts fixed charges and the interest begins from the day of cash withdrawal. These are the costliest form of credit.

Though app-based lenders offer attractive deals on personal loans, there could be hidden charges. You have to be careful while borrowing from fintech apps.