Ideally, everyone should have an emergency fund. It is important to note that this is not the same as savings. A savings strategy is both short term and for the distant foreseeable future. An emergency fund is a stopgap measure. You should always have some funds to manage a crisis and, whenever you have saved more than what is deemed necessary, the surplus can move into the larger savings account. This separation of savings is important because, if you conflate savings and emergency funds then, you may end up with neither.
How to Get Cash for an Emergency
An emergency may be foreseen or unforeseen, manageable or daunting. Regardless of the nature of the emergency or its severity, you may need some cash and you may not be able to turn to your bank even if all you need is a few hundred dollars. The reason being because banks only entertain loans starting in the thousands. In any case, many people get turned down by banks due to a poor or average credit score. Here are a few real answers to how to get cash for an emergency.
A personal loan from family, friends or colleagues is the best first option. You can borrow some funds without any interest and diligently repay it in full over a course of time. If you can, it is best practice to repay the entire sum at once as soon as you have the cash to spare. Unfortunately, many people do not have the option of asking family or friends. Many are not be in a position to lend a few hundred or thousand dollars.
A payday loan is an easy way to get a few hundred dollars. If you are employed with a company that has a provision for cash advance, then this is another good option to explore. While there are differences, a cash advance is not very different from a payday loan. You will be repaying the borrowed money when you get your next paycheck. The only difference is that your employer may not charge interest on the amount borrowed with a cash advance. However, a payday loan, comes along with a substantial interest and you will have to repay your principle borrowed and the interest all at once when you get your next paycheck. With a cash advance from your employer, they may offer the option to split your repayment into installments –making it easier to repay and an even better option.
Another option people choose when faced with a money emergency is a car title loan. You can use any type of vehicle to qualify for this option (i.e. motorcycle or boat), not just a car. You must simply be the owner of the vehicle whose title is pledged to get the loan. Car title loans are secured, short-term propositions. This option has lower rates of interest compared to that of payday loans and the amount you may borrow will depend on the value of your car. Another good thing about this option is that you can borrow more than what a payday loan will offer or what your employer may be willing to approve as a cash advance. Car title loans, on average, are due to be repaid within thirty days. However, some lenders are beginning to offer longer repayment terms. Another upside to this option is that many lenders allow restructuring of repayment terms when necessary so you do not have to worry about losing your car, which is a common worry with this form of borrowing.
If you are a homeowner, then you can cash in on the value of your property with an equity loan or equity line of credit. Banks do often consider such loan requests provided the amount is worthwhile. An emergency that requires only a few hundred or just a thousand dollars is not really a situation that warrants a home equity loan or line of credit. Equity loan amounts are usually several thousand dollars –making it advantageous for banks being that their interest is in gross profit (the result of interest collected upon principle amounts borrowed). Because of this, they are not into lending a few hundred dollars. You can however get a line of credit on your account, if you are a prime customer of the bank.