Life can certainly be unpredictable and when an emergency happens, one thing can usually solve the problem. That thing is, of course, money. But what if you have no money to pay for your emergency, are you stuck with taking out a loan? Absolutely not, here are some other options that you can and probably should look into before applying for a loan.
Prioritize Your Expenses
The first step in finding some extra cash is prioritizing your regular monthly expenses. This is way that you can find extra cash, even in a seemingly tight budget. Take a look at your budget and look at where cuts can be made. This could involve making some sacrifices such as skipping a dinner out or even putting your satellite TV bill on hold. If these sacrifices can help you avoid the expense of a loan, they are well worth it.
Negotiate With Current Creditors
These days, creditors are more likely than ever to negotiate with you. Most know that if you default on a payment that you are likely to default on the entire debt. Rather than accept this, many will work with you to reduce payments. Contact auto loan companies and credit card providers and try to negotiate a reduced payment. You may even be able to defer a payment completely, freeing up plenty of money to handle your emergency.
Cash Out Investments
If you have investments such as stocks, bonds or a 401K account, it might be time to tap into them. This may provide plenty of money to handle your emergency, but be careful to weight the costs. Tapping into these funds may come with penalties or tax consequences. Before you proceed, make sure that these costs do not exceed the cost of taking out an emergency loan.
Use Your Current Credit
Nobody likes to charge up their credit cards, but with emergency loan interest rates exceeding 100 percent, they may be a good place to turn. If you have the available credit to take care of an emergency expense, calculate the potential interest costs and proceed if the numbers make sense. If you would like to go with this option but do not have enough credit, contact your card issuer and ask for a credit line increase.
Consider Crowd Funding
Crowd funding options like GoFundMe can be a terrific way to come up with emergency money if you have a legitimate heartfelt need for cash. Need to fund some emergency concert tickets, this is probably not the option. But, if you need to pay for a surgery for your child, it may be just the ticket. A crowd funding page created by you or a friend could yield thousands of dollars in money, especially if combined with some promotion on social media.
Come Up With A Side Gig
Is there some time before you need to pay for your emergency expense? If so, you may be able to come up with a side hustle that can make you the money you need. There are a ton of ways to make extra money on the side and many of them pay within a week and sometimes the same day. Consider driving for Uber, delivering food, dog walking or collecting scrap metal. With a little effort, you could come up with hundreds of dollars in no time flat.
To Sum It Up
While a loan may be an easy solution, it is certainly not the only way to secure funding for an emergency expense. Before you break down and apply for new credit, try out some of the options above. A little effort goes a long way and once the expense is paid for, you have a terrific source of income to start an emergency fund.
Starting An Emergency Fund
An emergency fund is crucial if you want to avoid financial issues in the future. Most financial planner recommend that you have at least six months of expenses in the bank. That means that if you need 3,000 dollars a month to pay your bills, you need 18,000 dollars in the bank. This number might seem intimidating, but it is very doable if you take it step by step. Here is what you need to do.
- Set up a savings account.
Open an emergency savings at a bank other than the one you normally bank at. This will help keep some separation of money so that you do not end up tapping into your savings.
- Automate savings.
Arrange for a certain amount of money to be automatically withdrawn from your paycheck and deposited into your new savings account. Even an amount as small as 50 dollars will eventually add up to the funds that you need.
- Create more savings.
Use the same tips that you used to come up with emergency money to come up with savings. Maintain your side hustles long term, at least until your emergency savings is complete.