Totaled your car? Had a medical emergency? Unexpected job loss? When you are strapped for cash, it may seem like there is nowhere to turn.
In fact, there are a multitude of options when you need money and have used up (or never had) an emergency fund. Of course, the best option is to save up the money yourself and avoid going into debt. But if that's not possible, check out some of the available methods to help you when you're in a pinch.
Each option has its own pros and cons, so make sure you consider your options carefully and fully understand the terms before you commit.
1. Personal loan
Designed for personal expenses, there are both secured (backed by collateral) and unsecured personal loans available through banks and other lending institutions. The better your credit score, the better interest rate you will likely qualify for. You can use a personal loan calculator to see what your monthly payments and total cost of loan would be over time depending on the amount you need and interest loan you qualify for. Make sure you understand the difference between payday loans and personal loans (here's a quick explainer).
2. Credit card advance
Most credit cards offer cash advances through ATM, bank withdrawal or checks that work like short-term loans. You will likely be charged a transaction fee and the interest rate will likely be higher than those on many of your other options, but a credit card advance can be a quick way to cover an expense when charging is not possible. The smaller limit on your card is your cash advance limit so check your cardholder agreement first to see if it covers your needs, and be aware that your cash advance APR is likely higher than your card's usual APR.
3. Retirement account loan
If you prefer to use your own money to help fund your emergency, consider taking a loan from the money you have invested in your 401(k) or IRA. The interest rates are usually low and it won't impact your credit score, but you might have to pay this loan back in a certain window of time or face penalties. You should steer clear of this method if you may lose your job anytime soon. Usually you must pay back the loan entirely if you leave the job or the loan will be considered an early withdrawal.
The added caveat here is that you should always be cautious of borrowing from your future -- retirement funds generally shouldn't be used as emergency funds, but sometimes life happens and you have nowhere else to turn.
4. Peer lending
Several P2P sites let you get a personal loan from strangers interested in lending to you as a source of investment. Interest rates, as with many loans, are based on your credit score and can make a big difference in the deal you strike. You may need to provide recent pay stubs to prove your income and risk late fees and credit dings if you don't stick to the pay schedule. You can check your credit scores for free on Credit.com before you apply for one of these loans so you can see where you stand.
5. Home equity loan or line of credit
You can also finance major expenses using your home as collateral. You risk foreclosure if you don't pay the loan back so it's important to consider all the possibilities before signing on. The interest rates are generally low and easy to qualify for (because they are secured by your home's value). They work like a second type of mortgage as long as you already have some equity built up. These are complex financial products, so make sure you really understand how a home equity line of credit works.
When you need money now, it can be daunting to take more time to go through your options. It's important not to rush yourself into making a choice and to consider the pros and cons of every option. It's a good idea to take the time you need to get emergency cash the best and most manageable way for your specific financial situation.