In today’s world, loans are a fact of life. Everybody has got certain needs and aspirations and hardly ever a person, especially middle class one, has enough liquid cash saved away to fulfil those desires and needs.

Even if there are certain savings and investments, they are kept to weather bad times and for the retirements. This gives way to the need of securing a loan to fund those aspirations. These aspirations may include the latest gadgets, expensive furniture, exotic vacations etc.

Apart from desire to get worldly possessions, there might be some emergency such as sudden repairs to the house or car, unexpected guests, unpaid bills, some medical emergency etc., when available cash is just not enough and quick influx of cash is required.

In such situations one looks to the banks and other lenders to provide a loan. Such lenders extend financial assistance on the basis of the borrower’s earning capacity, repaying capacity, past credit record etc. Let’s discuss some of the most popular ways of arranging required funds through borrowing route.

Personal loan

Personal loans are multipurpose loans which can be used for any purpose on the discretion of borrowers. They are of two types, secured and unsecured. While terms and conditions including interest are easier for secured loan for obvious reasons, unsecured personal loans involve deeper scrutiny of the borrowers and more extensive paperwork. Interest rates are also on the higher side with unsecured personal loans as the risk is greater for the lender.

Documents required to be submitted include employment proof, identity proof, residential proof and in case of secured personal loan documents of the hypothecated asset. Tenure of the loan is between three to five years. To payback the loan amount with interest, post dated cheques or auto debit enabling document is required.

Best thing about personal loans is that the tenure and amount is larger helping the borrower manage his/her finances better. On the downside, time required for approval is long, 10 to 15 days, making this route unfit for emergencies.

Credit card advance

Most credit cards come with the facility of withdrawing cash up to a maximum percentage of the credit limit available. This is fairly easy option as no paperwork is required and cash is available instantly. But interest on the cash withdrawn is charged on the per day basis and the resultant amount can be quite hefty if amount borrowed is not returned back in time. The default will also be included in the credit report as a big negative.

Bank overdraft

Some banks extend overdraft facility with a bank account making it feasible to withdraw money over and above the bank balance. While this method is easy and hassle free, banks charge hefty fees for overdraft services. Moreover the limit can be changed by the bank without prior notice and the borrower may be asked for repayment anytime making this avenue quite unreliable.

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