Need cash fast? Find out how personal loan can be the perfect solution for managing urgent financial needs quickly and conveniently. Life can sometimes throw unexpected financial challenges at us, leaving us scrambling for funds. If you find yourself in such a situation, rest assured—there are several ways to address your monetary needs. The most popular options are Personal, credit cards, and instant loans. These financial tools have pros and cons, and using them wisely can help you tackle immediate requirements without jeopardizing your financial health.
Let’s examine how to manage sudden expenses, such as needing ₹7.5 lakh, using a combination of borrowing options.
A Smart Approach to Borrowing
Imagine you require ₹7.5 lakh to meet an urgent financial obligation. Instead of relying entirely on one source, such as a personal loan, you can strategically divide the amount among multiple channels like credit cards, instant loans, and personal loans. Here’s an example of how this can work:
- Personal Loan: ₹3 lakh
- Instant Loan: ₹2 lakh
- Credit Card: Use the remaining balance to pay vendors directly or cover smaller expenses.
This diversified approach offers several advantages, such as reducing your overall interest burden and maintaining a healthy credit score.
Benefits of Combining Borrowing Options
- More manageable Repayment of Smaller Amounts: Splitting your borrowing needs into smaller loans and payments makes repayment more manageable than handling one large loan.
- Lower Interest Costs: Personal loans often have higher interest rates. By combining them with lower-cost options like pre-approved instant loans or smartly using credit cards, you can keep the overall cost of borrowing in check.
- Boosts Credit Score: Responsible use of a portion of your credit card limit reflects positively on your credit score as long as your credit utilization ratio (CUR) remains below the ideal threshold (typically 30%).
- Leverage Pre-Approved Offers: Many banks offer pre-approved instant loans via net banking or mobile apps. These loans are faster to disburse and often have competitive interest rates. Pairing such loans with a personal loan can help balance your financial burden.
Caution: Avoid Over-Borrowing
While opting for multiple borrowing options is a practical approach, it’s essential to proceed cautiously. Applying for too many loans can result in multiple hard inquiries on your credit report, potentially lowering your credit score. To avoid this, use pre-approved loans or credit limits that do not require fresh applications.
Advantages of Using Only a Personal Loan
If you prefer a single solution, a personal loan can also be an excellent choice for meeting urgent financial needs. Here’s why:
- Single Hard Inquiry: Unlike using multiple credit products, applying for one personal loan involves a single hard inquiry on your credit report, minimizing the potential impact on your credit score.
- Structured Repayment Plan: Personal loans come with fixed monthly installments (EMIs) and a clear repayment timeline, making it easier to budget and manage your finances.
- Lower Credit Utilization: By relying solely on a personal loan, you keep your credit card limit intact, reducing your CUR and improving your credit score.
- Marginal Credit Score Boost: A well-managed personal loan with timely repayments can positively affect your credit score.
Final Thoughts
When faced with an urgent need for funds, choosing the right mix of financial tools is crucial. A combination of personal loans, instant loans, and credit cards can help you strike a balance between affordability and convenience. However, it’s equally important to exercise caution to avoid over-borrowing or negatively affecting your credit score.
Whether you go for a single personal loan or a combination of borrowing options, continually assess your repayment capacity and interest costs before taking the plunge. Financial emergencies may be unavoidable, but smart borrowing can ensure you tackle them effectively without compromising your financial stability.
