Personal investment coaches like to advocate for an emergency fund, the money you set aside to bail you out in the event of a rainy day. Suppose you had a medical emergency, totaled your car or lost your job, you’d ideally run to your emergency fund account as your exit strategy. Considering the nature of the emergency, digging into your emergency fund is sometimes not the best idea. Or, you might not be having an emergency fund yet in the first place. Caught up in a personal financial dilemma, what do you do?
Seek credit card advance
Most people intuitively turn to their credit cards for funds when they’re strapped for cash. Most credit cards have provisions for cash advances that users can access through bank, ATM or check withdrawals. These cash advances work just like any short-term loans. Since most of us have at least one credit card, the ubiquity makes credit cards a convenient source of cash, especially for those who do not know about other alternatives.
With credit cards, prepare to pay a transaction fee and a rather higher interest rate compared to most other sources of credit. In terms of access, there is no denying; a credit card advance can be a really quick means to cover an unforeseen expense.
Get a bank loan: another popular option
You probably have a personal bank account with some banking institution. These banks typically offer two types of personal loans designed to cover customers’ personal expenses: secured and unsecured loans.
Secured loans require a collateral whose value can cover the amount you’re borrowing. Unsecured loans on the other hand require no collateral as a form of security. Both types of loans however will be more accessible with better interest rates if you have a good credit score. Your credit history will also determine your access to these loans.
Caveat: Watch out for high-interest loans and make sure you can repay the loan on time. In addition, think carefully about any form of collateral that you pledge to cover your loan before borrowing. You don’t want to lose your home to a loan you’re unable to pay.
Consider your local credit union
If you’re a member of any credit union, you may want to check with your union whenever you need a quick loan. They might give you more personalized attention, increasing your chances of getting approval for a loan compared to mainstream banks.
Check with peer to peer lending sites
While most of these options may take heaps of paperwork and a while to access, there are online personal loans that you can access much quicker; sometimes even within one business day. Peer to peer, or simply P2P loans are loans that individuals and investors make available through online platforms. A P2P lending site connects you with other individuals or institutions that are willing to lend you money when you direly need it. They are different from bank loans in that they are available over the internet and tend to have more favorable terms.
The sources of funds to offset an emergency expense are many. It is best to go for an option that best suits your financial situation.