Last-Minute Options for a Financial Emergency

Life happens sometimes and it’s not uncommon for individuals to run into unexpected financial emergencies. However, without time to plan for unforeseen expenses and without enough funds to face a financial challenge, emergencies can strain your finances. In our post on ‘Planning for the Future’ we discussed how putting money into an emergency fund or having insurance coverage can help with unforeseen medical or other emergencies. However, if you have neither of those, we’re going to provide you a few more options when you’re in a financial emergency.

Traditional Loans

Traditional loans include both secured and unsecured through banks or credit unions, with the latter requiring a credit check. The better your credit the better interest rate you will likely qualify for. Credit unions are generally a good option as unlike banks they are cooperative financial institutions controlled by their members. They are typically non-profit enterprises which means that they usually tend to lend money at more favorable rates than banks. Investopedia suggests that credit unions may also have more generous lending terms, and while interest rates will differ state by state, APR and application fees, for example, may be less than with the big banks.

Title Loans

When you find yourself in a troubling situation and have bad credit and limited options, a title loan offers some benefits over traditional loans. Finance expert Justin Pritchard explains that one benefit is that you don’t need good credit, as the loan is secured by the value of your asset. Additionally, they can be secured in a matter of hours or within a day. Title loans are available countrywide and you’ll need to provide a clear title in your name. For example, the title loans in Lorain, Ohio will let borrowers continue to drive their vehicle even after the ownership papers are posted as collateral. This is especially useful for those who need capital but also need their car to work. Fortunately, title loans are available in most states with high profile lenders providing services in Texas, including in Round Rock, New Mexico and Nevada.

Credit Card Advance

Most credit card providers will offer cash advances, albeit at a higher APR than the normal purchase APR including an additional 5% fee for the advance. However, if you’re in need of cash fast and have no other options, this is the fastest option of the ones we have included in this article, provided your credit cards aren’t maxed out. Credit card expert Lindsay Konsko recommends that you should only use cash advances in real emergencies and take out only what you need. It’s also advisable to use a card with zero balance, as any other type of balance (i.e. purchases) will accrue additional, separate interest.

401(k) Advance

Using your own money to fund your emergency costs could mean taking an advance from the money invested in your 401(k) or IRA. This way you don’t have to borrow from someone else and the interest rates are generally low. A caveat to this method is that you will typically have to repay it by the next tax period or face penalties from the IRS. While this option uses your own money, it’s generally not advisable as there are too many variables that can impact the repayment. This includes the loss of your job, at which point you’ll have to pay the loan in its entirety or it will be considered an early withdrawal, subject to tax penalties. However, sometimes you may not have any other option.