WHY IT IS IMPORTANT TO DETERMINE LIFE INSURANCE NEEDS?
First and foremost, insurances are not investment tools. Insurances are risk management tools. Although some insurance plans incorporate an investment component, the return from such investment component is very very low. With this understanding, let us discuss why we need to determine our life insurance needs.
Without having a ballpark idea about the insurance need amount, we may end up buying insurance either too high or too low than our needs. The repercussions of buying life insurance lower than our needs is easily understood – our dependents will not get adequate coverage and they may suffer from financial misery. This negates the whole purpose of buying a life insurance policy.
Now, what are the repercussions of buying higher life insurance than needed. While a slightly higher insurance does not hurt, excessively high amount of the policy means higher premium payments. As mentioned before, life insurance is fundamentally a risk management tool and return on investment if any is generally negligible. Now, one may argue that in case the insurance claim happens the claimant can get a higher amount if a higher amount of insurance policy is taken. The fundamental issue in this argument is that it ignores the statistical assumptions in insurance. The insurance system works because only a small fraction insurance policy will ever be exercised. That means the possibility that the life insurance policy you bought will be exercised is very very low. So, the expected return for the extra premium paid is also very very low.
SO, WHAT AMOUNT OF LIFE INSURANCE DO I NEED ?
The answer to this question lies in asking ourselves why we are buying this life insurance? We buy life insurance not for ourselves but our loved ones. We buy life insurance so that people dependent on us do not suffer financially if we are not here to take care of them.
With this in mind, we can take two approaches – we can either calculate the amount that can replace our lifetime earnings (till retirement) and use that as as the amount for insurance or we can calculate the amount required today to fulfill the financial needs for our dependents in our absence. Let us dig deeper.
INCOME REPLACEMENT METHOD
Yes, your value to your family is much higher than what you earn for them. But, in case of life insurance there is a term called Human Life Value (HLV) which determines how much life insurance you need. In case of the Income Replacement Method, the HLV is calculated as the amount which will replace the expected income of the insuree.
For this we need to know the expected investment return on investment, expected income growth of the insuree and the difference between current and retirement age. The assumption here is that if the insurance amount is invested in fairly low risk investment, this will generate the same income as the insuree, including the possible increments.
NEED BASED APPROACH
This approach considers the HLV as the amount needed to take care of the financial needs which currently the insuree is taking care of. So, a portion of these needs are in the form of expenses of the family apart from her personal expenses. Another part is the family liabilities such as a mortgage. Part of the liabilities can be nullified by available assets such as provident fund, etc.
So, to calculate the insurance amount with this approach we need to know the expenses apart from personal expenses, long term inflation assumption, expected rate of investment growth, family liabilities and available assets.
WHAT IS VOLUNTARY PROVIDENT FUND (VPF)?
Fundamentally, VPF is the extension of the Employees Provident Fund (EPF) scheme. In EPF there is an upper ceiling (12%) on what percentage of salary (basic + DA) employees can invest.
Employees can choose to contribute more than that upper ceiling in the PF scheme upto 100% of their salary and this voluntary contribution is considered as tbe Voluntary Provident Fund (VPF). Unlike EPF, there is no matching contribution from the employer.
As VPF is an extension of EPF, employees who receive monthly salary, i.e. who are eligible for EPF are also eligible for VPF.
VPF falls under the EEE (Exempt – Exempt – Exempt) tax regime. Contributions towards the VPF is eligible for 80C deductions upto Rs. 1.5 lakhs. Also, the interest earned is tax exempt as per section 10 of the Income Tax Act.
HOW IS IT DIFFERENT FROM EPF AND PPF?
The basic difference in VPF from EPF is that there is no employer contribution. Apart from that VPF is guided by the same rules and interest rates.
Compared to PPF, VPF seems to be a better choice.
It is more convenient because unlike PPF the depositors do not have to approach the post office or any designated bank. They can just choose to increae their EPF contributions by informing their employer.
The interest rate on VPF is in line with EPF and higher than the PPF rates.
While PPF has a limited tenure of 15 years and needs to be increased by blocks of 5 years, VPF is open till retirement of resignation.
WHAT IS PPF?
Public Provident Fund (PPF) is a 15 year scheme offered by the post office and designated banks and carries a guarantee by the Central Government. The tenure can be extended beyond 15 years indefinitely for ever in blocks of 5 years. The rate of interest payable is set quarterly by the Central Government. This schema is portable from the post office or one bank to another. Holders of the EPF scheme can also opt for PPF.
A PPF account can be opened by an adult individual in his/her own name of on behalf of a minor. The account cannot be opened by an HUF.
The minimum amount that can be deposited is Rs. 500. The maximum allowed deposit in a year is Rs. 1, 50, 000. Any deposits excess of this limit will neither earn interest nor be eligible for tax benefits. There can be a maximum of 12 deposits in one year.
As mentioned before, the Central Government fixed the applicable interest rate on PPF every quarter and the current applicable rate is 8.0%. The interest is calculated based on minimum balance from the 5th of a month to the end of the month and compounded annually on 31st March.
The PPF falls into the EEE i.e. Exempt- Exempt -Exempt category. The amount deposited is eligible for tax deduction under 80C and the interest earned is exempt from income tax under section 10 of the Income Tax Act.
Premature withdrawal is allowed after completion of five years for the following reasons:
1. Serious ailments or life threatening diseases of the Account holder, spouse or dependent children or parents
2. Higher education of the account holder or the minor account holder.
WHAT IS GRATUITY ANYWAY?
Gratuity is a one time payment to an employee by an employee at the termination of employment after a minimum of five years of continuous service.
CRITERIA FOR EMPLOYER
According to Payment of Gratuity Act , 1972 (hereafter the act) the criteria for employers are
1. Every factory, mine, oilfield, plantation, port and railway company.
2. Every shop or establishment which has or in the past twelve month had employed ten or more people.
3. Once an employer comes under this act due to the number of employees as mentioned above, it will continue to be governed by this act even though the number goes under the requirement of the act.
WHAT KIND OF EMPLOYMENTS ARE RELEVANT TO GRATUITY?
According to the act, an employee is defined as
“any person (other than an apprentice) employed on wages, in any establishment, factory, mine, oilfield, plantation, port, railway company or shop, to do any skilled, semi-skilled, or unskilled, manual, supervisory, technical or clerical work, whether the terms of such employment are express or implied, and whether or not such person is employed in a managerial or administrative capacity, but does not include any such person who holds a post under the Central Government or a State Government and is governed by any other Act or by any rules providing for payment of gratuity.”
When it comes the eligibility, the requirement of “continuous service” must be clear. The “continuous service” includes “service which may be interrupted on account of sickness, accident, leave, absence from duty without leave, layoff, strike or a lockout or cessation of work not due to any fault of the employee”.
If an employee, who is not a seasonal employee, is not on a continuous service for one year or six months, she shall be considered to be employed continuously for the purpose of this act,
1. For one year, if in the previous calendar year the employee worked for
i. A minimum of 190 days, in case of a mine worker or an establishment which works for less than 6 days a week.
ii. A minimum of 240 days in any other case.
2. For six months in the previous 6 calendar months the employee worked for
i. A minimum of 95 days, in case of a mine worker or an establishment which works for less than 6 days a week.
ii. A minimum of 120 days in any other case.
HOW IS THE GRATUITY AMOUNT CALCUALATED?
The gratuity amount depends on the last drawn salary and tenure of employment. For calculation of tenure of employement, a time period of more than 6 months is considered as one year. The salary includes basic salary and dearness allowance.
For the employers who are covered under the act, the formula for calculation is
Last drawn salary X years of employment X (15/26)
For other cases
half a month’s salary X years of employment
Note: There is no law which restricts an employer from paying gratuity.
PAYMENT OF GRATUITY
The gratuity payment is made
a. On superannuation, or
b. On retirement or resignation, or
c. On his death or disablement due to accident or disease.
For ‘a’ and ‘b’ at least five years of continuous service is a requirement. The requirement does not apply for ‘c’.
Tha current limit for maximum gratuity payment is Rs. 20 lakhs as per amendment in 2018.
After completion of one year of employment, an employee must select one of more nominee(s).
If the employee has a family at the time, the nominee(s) must be a family member. If the employee does not have a family at the time of the nomination, but later starts a family, the nomination for any person who is not a family member will become void and the employee needs to nominate a family member.
Gratuity payments are exempt from income tax with some limitations.
As per section 10 (10) of the Income Tax Act, gratuity payments are exempt from income tax with some limitations.
For government employees the whole gratuity is exempted from income tax.
For non-government employees, the exemption limit depends on whether the employers is covered under the act or not.
If the employer is covered under the act
The least of the following
- The maximum allowed gratuity.
- Last drawn salary X years of employment X (15/26)
- Actual Gratuity received.
In the employer is not covered under the act
The least of the following
- The maximum allowed gratuity.
- Half months average salary in last 10 months X years of employment
- Actual Gratuity received.
Most employed people are covered under the Employee Provident Fund (EPF) scheme. Although the goal of the EPF Scheme is to collect contributions from the employees (the members) and the employers for the retirement benefit of the employee, the deposited amount can be withdrawn in some special cases.
LIFE INSURNACE POLICY
A member (employee) can apply to use the contributions made by her in the EPF fund towards the annual premiums of a life insurance scheme. Only the contributions made by the member with interest earned and not the contributions of the employer can be used for this purpose. There should not be any prior assignment of the policy and the policy should be free from all encumbrances.
Before the member reaches age 55, no educational enodwment policy or marriage endowment policy an can be financed using funds from EPF.
FOR BUYING A DWELLING HOUSE/ FLAT OR PURCHASE OF LAND TO BUILD A HOUSE
After completing at least five years as a member of the EPF Scheme and accumulating own contribution with interest of at least Rs. 1000, a member can request funds for buying a dwelling house or land for that purpose.
In case of purchase of a land for construction of house, the maximum amount which can be withdrawn is member's basic wages and dearness allowance for twenty-four months or the member's own share of contributions, together with the employer's share of contributions with interest or the actual cost towards the acquisition of the dwelling site, whichever is the least.
In case of purchase of a readily built house or flat or construction of house and flat , the maximum amount which can be withdrawn is member's basic wages and dearness allowance for thirty-six months or the member's own share of contributions, together with the employer's share of contributions, with interest, or the total cost of construction, whichever is the least.
No joint property, except with spouse, can be financed this way.
REPAYMENT OF LOANS
After completing at least ten years as a member of the EPF Scheme and accumulating own contribution with interest of at least Rs. 1000, a member can request funds repay a loan in her own name, or spouse’s name or jointly with spouse.
The maximum amount which can be withdrawn is member's basic wages and dearness allowance for thirty-six months or the member's own share of contributions, together with the employer's share of contributions with interest or the amount of outstanding principal and interest of the said loans, whichever is least.
In some other cases the member can withdraw funds as advances.
In case the factory/establishment is locked down, resulting in unemployment of the member without any compensation for at least fifteen days or the member is not receiving wages for any other reason apart from strike for at least two months, the member can an application to receive funds from the EPF as an advance.
In case the member is discharged or dismissed and the member challenges the discharge/dismissal, the member can also request for advance payments.
A member can request for advance is case she or a family member is hospitalised for at least one month for major surgical operation in a hospital or suffering from T.B., leprosy, paralysis, cancer, mental derangementor or heart ailment.
The maximum amount than can be withdrawn is the member's basic wages and dearness allowance for six months or her own share of contribution with interest in the Fund, whichever is less.
3. Education or marriage
After completing at least seven years as a member of the EPF Scheme and accumulating own contribution with interest of at least Rs. 1000, a member can request up to 50% of own contributions with interest for his or her own marriage, the marriage of his or her daughter, son, sister or brother or for the post-matriculation education of his or her son or daughter.
4 Physical Handicap
A member who is physically handicapped can request money to buy equipments which helps to minimise hardship. The maximum amount that can be withdrawn is basic wages and dearness allowance for six months or his own share of contributions with interest thereon or the cost of the equipment, whichever is the least.
5. Natural Calamity or other abnormal conditions
Upto Rs. 5000 or 50% of own contributions can be requested from the EPF is case the member experienced damage of property due to floods, earthquakes or riots etc.
If you are a salaried individual you must have a pension plan offered by your employer. Understanding what type of pension plan your employer is offering is important to judge whether or not this plan is adequate and whether or not you need to separately save for retirement. Many people often suffer from a false sense of comfort with the employer offered pension plan and do not think that they need to save anything else but panic realising that their retirement benefits will not be enough just few years before retirement. At that point they neither have the time nor the risk bearing capacity to drastically change the situation. In this article we will talk about two primary classes of pension plans, their benefits and more importantly their limitations in retirement planning.
DEFINED BENEFIT (DB) PLANS
As the name suggests, this kind of pension plans assures benefits known beforehand. The pension payments are calculated based on years of service, salary history etc.
For the employee, the biggest benefit of a defined benefit plan is certainly associated with the pension payments. So, the risk associated with the pension plan rests with the employer. If the pension plan fails to generate enough returns required to make the projected pension payments, the employer needs to pay for the shortfall.
This makes the DB plans undesirable for the employers. Requirement of assuring returns and lower acceptable uncertainty means that the portfolio needs to be dominated by fixed income instruments and investment in equity has to be limited. In a decreasing interest rate environment this increases the shortfall of these pension plans and puts financial stress on the employers to maintain such funds. This may make whole plan unviable.
Due to above mentioned issues, only a limited number of employers offer DB plans – Govenrment Banks and Central Civil Services are such examples.
DEFINED CONTRIBUTION (DC) PLANS
This is where the defined contribution plans come. DC plans do not guarantee any assured return. Instead, it defines the contribution made by the employees and the employers. The employees have the freedom to choose the risk they want to take for their retirement plan. So, if one wants, she can choose conservative plans with lower risk or a growth plans with higher risk.
So, both the choice of investment selection as well as the investment risk is diverted to the employees. Most pension schemes nowadays are DC plans. Plans offered by the National Pension System (NPS) are also defined contribution plans.
IS YOUR PENSION PLAN ADEQUATE?
As we can see that both types of pension plans have some benefits and some limitations.
The issue with a defined benefit plan is that it is designed to take lower risk. This also means that while it provides security of the pensioner, the pensioner may miss to take advantage of high risk tolerance capacity, which comes with a secure government job and assured income.
It is highly recommended for these employees to create separate aspirational portfolios with growth investments – a higher proportion in equities and some alternative investments.
The issue with a defined contribution plan is completely different. As the burden of choice rests with the employee who in most cases do not have the skills of investment selection, may end up choosing investments completely different from what is suitable for their risk-profile and future goals. It is highly recommended that the people covered under a DC plan hire an investment professional to help them make the decisions, and if needed, create a complementary portfolio.
Disputes over ancestral property is not uncommon. Family Settlement is a way to reach a peaceful arrangement avoiding long and expensive legal process.
WHAT IS A FAMILY SETTLEMENT ?
Family settlement is an agreement between the family members who have title, claim or interest in the property. Family settlement is applicable not only to immovable assets, but also to movable assets such as jewelry and money in bank accounts.
REQUIREMENTS OF FAMILY SETTLEMENT
A family settlement has to be between related people, i.e. between members of a family.
It has to be entered by all family members voluntarily and with good faith without any force or fraud. Generally, an agreement is reached in the presence of a lawyer or a senior family member. A settlement can be oral, in which case no settlement is required. Also, a mere memorandum that an arrangement is reached also is not required to be registered. But, if an agreement is prepared with the terms and recitals of the family arrangement, that documents need to be registered under the Registration Act 1908, as per the judgement of the case Sita Ram Bhama vs Ramvatar Bhama dated 23rd March 2018. All family members must sign the settlement document.
BENEFITS OF A FAMILY SETTMENT
1. NO CAPITAL GAINS TAX
A family settlement is not considered as a transfer, but merely rearrangement of the rights. Therefor a family settlement does not attract any capital gains tax.
2. NOT TREATED AS A GIFT
As per Income Tax Act 1961, Gifts of any kind, whether in cash or other movable or immovable more than value of Rs. 50,000 is considered as income from other sources and tax accordingly. Family settlement is not considered as a gift.
3. CLUBBING PROVISIONS IS NOT APPLICABLE
Clubbing of income means income of another person (for example: Spouse) included in the income of the tax payer. Section 60 to 64 of the Income Tax Act deals with such provisions.
In case of family settlements such provisions are not applicable.
While family settlement offers an easy and peaceful way to organize assets, it can be only used when the dispute between the members are not excessive and the members are willing to settle. Also, although a family settlement is quite enforceable, it can be challenged on the ground that the settlement was not reached in good faith and all information was not available to everyone.
Trusts are governed by Indian Trusts Act 1882 which defines a trust as “an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner.
In simple language a trust is transfer of legal ownership of assets to someone who agreed to take care of the assets till some future date on behalf of one or more beneficiaries. Consider you want to transfer some assets to your granddaughter when she turns 18. You can set up a trust she as the beneficiary. Trusts can also be set up for charitable purposes. The person who transfers the assets is called the “settler” or “author of the trust”, the person who is given the responsibility to manage the assets is called the “trustee” and the person for whose benefit the trust is created is called the “beneficiary”.
DIFFERENCE BETWEEN PRIVATE AND PUBLIC TRUSTS
The basic difference between the public and private trust is how the beneficiaries are defined. In case of a public trust, the beneficiaries are either the general public or a certain section of the public. For example, charities and educational trusts.
Whereas in case of a private trusts the beneficiaries are specific individuals. Private trusts are relevant for estate planning purposes.
BENEFITS OF PRIVATE TRUST IN ESTATE PLANNING
A private trust is a private document and does not require getting published in newspapers like a will.
2. No Registration
A private trust does not require registration unless it involves any immovable property.
3. Insolvency Protection
A private trust provides insolvency protection if it is an irrevocable trust and assets are transferred to the trust at least 2 years before the insolvency.
Note: An irrevocable trust is a trust which cannot be modified, amended or terminated without the permission of the beneficiaries. The author of the trust effectively looses all rights over the assets transferred to the trust.
SOME LEGALITIES OF TRUST
1. Lawful purpose
A trust can only be created for lawfull pupose. Indian Trusts Act defines the lawful purpose which is not
a. forbidden by law.
b. is of nature that, if permitted, defeats the provision of any law.
c. is fraudulent.
d. involves or implies injury to any person or property.
e. the Court regards it as immoral or opposed to public policy.
2. Creation of Trust
A trust is created when the author of the trust with reasonable certainty indicates in any words or acts
a. an intention to create a trust
b. the purpose of the trust.
c. the beneficiary.
d. the trust-property.
Note: As mentioned before if a trust involves an immovable property, it is not valid unless declared “by a non-testamentary instrument in writing signed by the author of the trust or the trustee and registered, or by the will of the author of the trust or of the trustee.”
3. WHO CAN CREATE A TRUST
According to Indian Trusts Act, a trust can be created by
a. every person competent to contract or
b. by or on behalf of a minor with the permission of a principal Civil Court of
I heard the following story as a kid. Here is what I remember:
A short fable of wealth? When I was a kid, I heard the following story. Here is what I remember:
The writer of the story is Ram who then just joined the college and became friends with another person named Shyam. Shyam had a rich lifestyle and liked to spend. When they completed college, Shyam got invited to the Ram’s house and got to meet their family. Ram had a big family with many uncles and aunts who live under the same roof with their children, and in some cases, grandchildren. Shyam was always curious how Ram’s family got their wealth. To his surprise none of the Ram’s family member seemed to do anything for a living. They enjoyed lavish lifestyle and spent a lot of money, but it was not clear where the money came from. He also noticed that the family members did not like each other. There was always some kind of tension in the family.
Confused, one night Shyam hesitantly asked the question to Ram. Ram became silent for a moment and then asked Shyam to come with him. He took Shyam to a protected area outside the house. There was a tree. The tree looked like a normal tree. Ram told that his grandfather got this tree as a gift from a fairy.
Note: Please bear with me. I am just using the fairy tale story to make a point.
The tree had magical powers and every year it give some fruits. The fruits, when ripe, became solid gold. But, for the previous five years the tree did not give any fruit. The family was first living off the fruits they had in stock. Then they started borrowing money. Ram’s grandfather lived a rich life with all the great things in life at his disposal. He had many sons and daughters because supporting a big family was not a problem for him. They also maintained a luxury lifestyle. Because of their lifestyle they attracted the attention of the elites and the people in power. Then Ram’s father’s generation did not have to do anything because money was always there. In fact Ram was the only person in the family to get a college education and wanted to do a job. Gradually their family got bigger and bigger. No one from the family wanted to move out because the fear that they would loose the share in the golden fruits. Slowly, the number of fruits from the tree started decreasing and at the same time the family grew in size. Although the magic tree stopped giving any fruit, the family was very optimistic that it would again start giving lots of fruits. The family was habituated in living in luxury and maintaining a "class" but nobody wanted to do anything for a living. It led to a lot of tension between the members.
After telling the story, Ram went to sleep. Shyam was taken aback by the story. He could not sleep. Late at night, he fetched an axe and went back to the tree. He cut down the tree and fled from Ram house. For a long time Shyam did not get in touch with Ram. After several years, Shyam met Ram accidentally. Ram seemed to not understand that Shyam cut down the tree. Though he was surprised that Shyam left and did not contact. He mentioned that someone cut down the tree. At first, the family was in shock. But, gradually family members developed different skills, got jobs or started businesses and moved out. The family slowly adjusted to life after the magic tree and collaborated with each other to pay back the debt they had accumulated. The family members used to equate the magic tree as the source of their wealth. After loosing the magic tree they started to understand their own capabilities to create wealth.
Loosing the magic tree was the luckiest event for the family.
This happens right? You are shopping and one person approaches you and gives you “free” credit card offer. You have never used a credit card, but having a credit option seems great. Now, you can buy the things you aspired and then pay off later. You are not limited by your salary. Also, they offered you cashback and other goodies. Yayyy! So, you go for more shopping.
A few weeks later the credit card bill comes and you pay the minimum amount due because you do not have money to pay the whole amount. Also, who would pay the whole amount if you can get by paying the minimum, right? This goes on for six or so months and one fine morning you get a call from the credit card company for an amount you did not anticipate. Turns out paying the minimum amount due does not really save you from the exorbitant interest they charge. So, the interest compounded and now you have to pay an amount you do not have.
Note: This is not a personal story. My own credit score is well above 800.
WHAT SHOULD YOU KNOW THE ABOUT THE CREDIT CARDS?
Did you wonder how does the credit card company make money? Most of these companies offer “free” credit cards. They also offer many benefits plus forgo about one and a half month worth of interest if they had lent the money in some other form. So, why they are so interested in selling credit cards?
It is about creating a bad habit of spending the money you do not have. The interest rates on credit cards after the grace period varies from 1.5% to 3% monthly . The rate depends on the type of card which depends on net worth and credit history of the person. Anyways, the annual interest rate of 1.5% to 3% monthly rate comes to 19.6% to 42.6% annually. So, if you miss any payment on credit card bill you are taking on a very very expensive loan. As the rates are higher for lower income individuals, they are more vulnerable to a credit trap.
Credit cards also allow cash advance (cash withdrawal from an ATM using a credit card) of around 20% -40% of the credit limit. But, they are subjected to an advance fee of 2.5% to 3% of the withdrawal amount. The bigger issue is that cash advances do not have any grace period and they attract around the same high interest rate mentioned above. So, your interest clock starts at the point you used the credit card to withdraw cash.
WHY SETTLEMENT MAY NOT BE THE BEST OPTION FOR YOU?
Now, let us come back to the problem we had. Consider the credit card companies offers you a settlement in which you have to pay only half the outstanding amount. Sweet deal, right ?
The problem is that when you agreed to settle the credit card debt and pay a lower amount, it will appear on your credit score for a considerable time and lower your credit score. The effect on the credit score can be similar to a personal bankruptcy.
Why does it matter? Because now you have to may higher interest rates for all the loans you take in the future – or worse the financial institutions may reject your loan applications for a long time. The few thousands “saved” through the credit card loan settlement may cost you not getting a loan for a house or a car for a long time. Even if you manage to get loans, you have to pay a higher interest rate. This can mean thousands of rupee more EMI per month payment for a considerable period.
WHAT ARE THE ALTERNATIVES ?
So, the best way to avoid the considerable hit on your credit score is to pay the outstanding amount in full. This may save you large amounts in the future. But, how to get the money?
1. Sell some assets
Look at your assets that you sell without harming your well being. We often carry stuff which we do not use. Yes, this may be painfull, but it is worth it.
2. Take a loan from friends and family
Reach out for help to your friends and family. After you clear the credit card debt- repay them with some interest.
3. Take a debt consolidation loan
Many financial institutions offer debt settlement loans to help you pay off other loans – say credit card loans. The interest rates are can be high because your credit rating got affected by the delayed payments. That is why we are keeping it as the last option.
You do not have to choose one option. You can first arrange some cash selling assets, then get some help from family and friends and for anything remaining take a loan.