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When you're facing a financial emergency, getting quick access to cash is a top priority. Depending on your situation, you may already have options at the ready. But if not, it's important to know where to look to avoid high-interest and predatory loans.
To help you get started with your search, here are five ways to get emergency money when you need it.
1. Emergency Loans
An emergency loan can come in the form of a personal loan, credit card cash advance or a payday loan. If you're considering one of these options, it's important to know how they work and what you can expect to pay.
Personal Loans
Personal loans are a form of credit you can use for just about anything, including for emergencies. Many personal lenders, particularly online-only lenders, offer next-day or even same-day funding if you're approved. Others may take an extra day or two, which may require you to make other accommodations in the meantime.
For traditional personal loans, interest rates can range from the single digits to the 35% or more, depending on your credit. While some lenders typically only work with people who have good or excellent credit, there are plenty of lenders willing to work with borrowers whose credit history is fair.
Also, these loans typically allow you to repay the debt over several years, so you don't have to worry about coming up with an immediate lump sum payment.
Some short-term personal loans may be available if you have bad credit, but their interest rates can be very high—some lenders charge annual percentage rates (APRs) in the triple digits.
As you consider your options, shop around and compare multiple lenders to make sure you find the right fit for you. If you're in the market for a loan, Experian CreditMatch™ can connect you with lenders.
Credit Card Cash Advances
If you have a credit card, you may be able to tap some of your available credit in the form of a cash advance.
Credit card cash advance interest rates can vary from card to card, but some can reach around 25%. Additionally, it's important to note that interest starts accruing immediately—there's no grace period like you might get with purchases—and credit cards typically charge an upfront fee, which is a small percentage of the advance amount.
Despite these drawbacks, a cash advance may be a decent option if you have bad credit and few affordable financing options.
Payday Loans
Payday loans are short-term loans with incredibly short repayment terms—typically 14 days—and exorbitant interest rates. The average APR is roughly 400%, and the short turnaround on payment can make it incredibly difficult to pay off the loan without taking out a new one. As a result, it's best to avoid payday loans altogether.
2. Friends or Family Members
If you have trusted friends or family members, you may be able to get some assistance from them in your time of need. Of course, asking for money or a loan from loved ones can be a tough decision that shouldn't be taken lightly.
It's crucial to iron out repayment terms and any potential interest beforehand to improve your chances of agreement and to avoid conflict.
Borrowing money in this way can be awkward and uncomfortable for both parties, especially if the borrower has a hard time with repayment. But it could be worth the discomfort to avoid making your financial situation worse with an expensive loan.
3. 0% APR Credit Cards
If you have good or excellent credit, you may be able to qualify for a credit card that offers an introductory 0% APR promotion. Depending on the card, you could use it for emergency expenses and get anywhere from six to 20 months to pay it off interest-free.
Keep in mind, though, that it may take a week or two to receive your card in the mail after you've been approved. If you need the money sooner, contact the card issuer before you apply to see if they can expedite delivery.
Some card issuers, including American Express, may even offer to provide instant access to your credit card information, so you don't have to wait until you get the physical card in the mail.
If you qualify and have the time to wait to receive your card, a 0% APR credit card can be an excellent option because of its low costs. Just be sure to create a plan to pay off the debt before the promotional period ends. Otherwise, you'll owe a higher interest rate on the remaining balance.
4. Home Equity Line of Credit (HELOC)
A HELOC is a revolving line of credit that's secured by the equity you have in your home. If you already have one in place, accessing that credit line may be as simple as using the debit card tied to it or writing a check.
HELOCs also typically offer interest rates in the single digits because they're secured by collateral. The downside is that if you don't already have one in place, a new HELOC can take several weeks to close, which may not be ideal for an emergency.
Also, some lenders may charge high closing costs, as well as annual fees. So be sure to shop around and compare these expenses before applying. Finally, one of the greatest risks of using a HELOC is that if you fail to pay back the debt, you could lose your home. Fortunately, they typically have long repayment terms, but it's still a risk to consider.
5. Look to Nonprofit Programs for Help
Some nonprofit organizations may be able to help you get the money you need. For example, organizations like Mission Asset Fund arrange lending circles with other people in your community.
Each person takes a turn borrowing money from others in the circle and paying it back, and interest rates are generally low. Just keep in mind that joining a lending circle doesn't guarantee you'll be the first in line to receive cash, so it may not help with your immediate needs. But if you can make it work, it can be a low-cost alternative to bad-credit options.
Also, take some time to search community centers and other organizations in your area that may be able to provide some immediate relief with your bills. There are nonprofit organizations willing to help people cover utility bills, rent, food and other necessities while you address your immediate financial needs.
How to Prepare for the Next Emergency
Getting your finances in order for the next emergency may not be high on your priority list right now. But once you've weathered the current storm, try to take some steps to prepare for the next one. Here are some actionable steps you can take when the time is right.
Get On a Budget
If you've got money left over after covering your necessities, making a budget can help you with the logistics of setting money aside for the future.
Start by writing out your income and expenses from the past few months, categorizing each expense as you do so to understand where your money is going. How you categorize your spending is up to you, but splitting up your expenses by necessary and discretionary spending is a good starting point. Then look for areas you can cut back a little each month to make more room for savings.
When you make a budget, remember to be realistic as it'll do you no good unless you can stick to it. At the end of every month, compare your spending against your set budget and see where you can make adjustments or cutbacks for the next month. Open a new savings account if you don't already have one and place a pre-budgeted amount of money inside as a separate emergency fund.
Create a Plan for Your Current Situation
If you're planning to borrow money to cover your current emergency situation, sit down and make a plan to pay it off as quickly as possible.
There's nothing wrong with having debt, but if you still have it when the next emergency hits, it can make it even more challenging to get the help you need.
Using your budget, look for ways to simultaneously save in your emergency fund and make extra debt payments. This can be taxing, especially if you're already living paycheck to paycheck. But if you can make it work, you'll save money on interest and gain some peace of mind.
Improve Your Credit
If your credit is less than stellar, taking steps to improve it can give you more options the next time you need money fast and don't have enough in savings.
Start by checking your credit score and credit report, and make a note of areas that you can address. Depending on your situation, it may mean paying down your credit card balances, getting caught up on past-due payments or disputing inaccurate information on your credit reports.
Improving your credit history can take time, but the long-term payoff in the form of more affordable credit can be worth it.
Continue Monitoring Your Credit
As you work on preparing for future financial emergencies, including improving your credit score, continue to monitor your credit score to make sure you don't get any surprises. If you see your score dip, check your credit reports to see what may have caused it and look for ways to set things right.
Your ongoing efforts can help you maintain a stable financial foundation that can protect you and your loved ones in the future.