After the unexpected rains that lashed Mumbai on July 26 came the horrific tales of people's possessions being reduced to absolute junk after water entered their homes.
While you can wait to replace the television set and the microwave oven, the bed, some basic furniture and a refrigerator are essentials.
If you have no money or don't have enough money to help you make a fresh start, you could consider the following options.
Claim your insurance
If you have been insured, get cracking. Check to see if you have adequate car or bike insurance.
There are two types of vehicle insurance: Policy A (known as third party insurance) and Policy B (comprehensive insurance).
Policy A is mandatory and is the minimum risk that has to be covered under the Motor Vehicles Act. This means the insurance company will cover whatever bodily harm or death is caused to other people if you have an accident with your vehicle.
Policy B covers the rest of the stuff. Your car being damaged due to a flood, earthquake, riot, fire and other such calamities. Even theft is covered.
If you are concerned about your car accessories like a music system or air conditioner being damaged, check to see if they were insured. If they were, you would have been paying an additional premium.
So, if you had your vehicle insured under Policy B, you can claim insurance. If not, you will have to bear the damages yourself.
If your vehicle has been damaged beyond repair or stolen, you should get the Insured Declared Value. It is the current showroom price of the vehicle after depreciation is taken into account. The older the car, the higher the depreciation. What this means is that the newer your car, the more money you can expect from the insurance company.
Do you have household insurance?
Check your policy carefully.
Have you only insured the house or the contents too? If you have only insured the house, then damage to walls, ceiling, floor and other such structural damages are covered.
If your possessions are lost or damaged, check to see if you have insured the contents of your home.
Take photographs of the damage and go through your insurance policy in detail to see what is required to make a claim.
Borrow
1. Loan on insurance policyIf you have a life insurance policy, you can take a loan on it.
This loan will be a percentage of the surrender value. The surrender is the amount payable to the policyholder should he decide to discontinue the policy.
Things to check out:
2. Loan on your Public Provident Fund
This depends on when you opened your PPF account. You can only take a loan from the third year of opening your account to the sixth year.
Also, the loan amount will be upto a maximum of 25% of the balance in your account at the end of the first financial year (if you opt for the loan in the third year).
If you opt for a loan in the fourth year, the second year's balance will be taken into account and so on.
Let's say you opened your account during the financial year 1997-1998. You can take the first loan during the financial year 1999-2000.
The amount you are entitled to as loan will be a maximum of 25% of the balance in your account at the end of the first financial year (if you opt for the loan in the third year). In this case, it will be March 31, 1998.
The loan must be repaid within 24 months.
Usually, the rate of interest on the loan taken will be around 2% more the rate of interest earned on the deposits in your PPF.
3. Loan on your fixed deposit
This works in the same way as the above. The loan will generally be around 75% of the amount you have deposited. Do check with your bank for specific details.
Don't forget to ask them what they will charge as interest. It will probably be around 2% higher than what you are earning on the deposit.
4. Personal loan
The most expensive option. You can take one for around 19% to 20%. However, if the company you work for has a salary account with a particular bank or is a very well known company, you will be able to get a discounted rate.
Also, check with your own company. Ask them what rate of interest they will charge if you take a loan from them.
Use your assets to get money
You can try mortgaging your home. This, however, is not a recommended option.
If you still need to consider it, however, you will need to give your property papers to the bank and they will assess the value of your property.
They will then give you a percentage of this value. You repay them regularly every month (in this aspect, it is just like a housing loan).
But should you default and are totally unable to clear the loan, the bank gets your home.
You could do the same with your shares. Give the bank your shares and other investments like National Savings Certificates or certain bonds. They will give you a percentage of this amount as a loan.
If you have a current home loan, you can top it up.
You can get an additional loan at the current rack rates of the home finance company. The rack rate is the one fixed by the home finance company and declared to the public.
Generally, home loans are given below the rack rate. So if the rack rate is 9%, they will offer you a loan at a discount for 8.25%. But top-up loans are given at the rack rate.
The top-up loans work on a very simple premise: as you repay your home loan, your loan outstanding (what you owe the home finance company) decreases. This, in turn, makes you eligible for more money.
Let's say you are eligible for a Rs 15 lakh (Rs 1.5 million) loan. Currently, your home loan outstanding is just Rs 10 lakh (Rs 1 million). So you can avail of a top-up of the balance Rs 5 lakh.
The PPF option
You can make a partial withdrawal on your Public Provident Fund.
But you can do this is only after five financial years from the end of the year in which the initial subscription was made. Let's say the account was opened in June 1993. The first withdrawal can only be made during 1999 - 2000.
The amount of money you can withdraw is limited to 50% of the balance in your account at the end of the fourth year -- immediately preceding the year in which the amount is to be withdrawn or at the end of the preceding year, whichever is lower.
If the account was opened in 1993-1994 and the first withdrawal made during 1999-2000, the amount of withdrawal will be limited to 50% of the balance as on March 31, 1996, or March 31, 1999, whichever is lower.
Sell
We can understand if you don't want to take a loan. Being in debt is no fun.
Besides, PPF is normally viewed as a long-term investment that should not be touched.
In that case, consider selling some of your shares or mutual fund units. You need the money and the bull market shows no signs of abating. You can be sure to get a good return on your investment.
If you do not have any shares, then you can break your bank fixed deposits.
If this too does not appeal to you, try borrowing from family and friends. And, if someone owes you money, now is a good time to request them to pay up.
