Having an emergency fund to fall back on is the best solution to cover expenses that you did not expect. But not everyone has the means to do so. Many people need to explore outside resources to help them cope with financial emergencies.
In the event you find yourself in the same situation, know that there are different financing options you can look into. However, it’s worth noting that they are not all created equal. Some may come with more financial drawbacks than others.
Thus, we’re highlighting below the best places to borrow money for any unexpected expenses that may come your way.
Credit unions are community-based and offer lower interest rates and fees than banks. Rather than seeking to earn a profit, their goal is to serve and return a profit to their members. So if you have poor credit and need immediate cash to cover an unexpected expense, credit unions can be an excellent option to consider.
But note that some credit unions may only lend to their members, and there are certain requirements that you have to meet. Thus, it wouldn’t hurt to start looking at a credit union in your community and secure a credit union account. You never know when a financial emergency will strike.
Another good option you can check out is online lenders. Compared to traditional lenders like banks or credit unions, they are much more lenient to their requirements and have a faster turnaround time. You can apply for a loan in the comfort of your home anytime and get the fund deposited into your bank account after one or two days if you’re approved.
Since online lenders don’t have to cover the costs of maintaining physical branches, they can offer you competitive loans with lower interest rates. But make sure to research the reputation of the online lender before committing to anything. For a starter, you can visit Creditninja.com to get an idea of a reliable online lender.
If you can’t borrow money from conventional lenders, peer-to-peer (P2P) lending can be worth exploring. Unlike the usual online lenders, you’re not borrowing money from a financial institution with P2P lending. But instead, it has online platforms that connect you directly to people who are willing to loan you the money.
With P2P lending, there are a variety of options, even if you have a poor credit rating. Each website sets the rates and the terms that will match your qualifications. Because every transaction is done online, it also has a quick application process, and you can get low interest rates too.
If you have an item of value for collateral, a pawn shop is another great place to borrow money for unexpected expenses. Loans from a pawnshop are easy to get since they don’t check your credit history. As long as you have the item of value, you can get the cash you need immediately.
Note that the items you can pawn may vary depending on the store or location. But most of them may allow you to pawn laptops, televisions, or jewelry. The interest rates and fees may also differ, but regardless of that, a pawnshop loan’s costs can be less than other types of loans.
Home Equity Line of Credit
You can also borrow money from your home equity line of credit or HELOC for expenses you did not plan for. But with a HELOC, you can borrow as much or as little money you need at any given time up to a certain amount. Typically, you’re allowed to borrow up to 80% of the equity of your home.
The good thing about using HELOC is you can usually get fairly low interest rates. But keep in mind that your home is used as collateral, so you can lose it if you default on the loan. You also have to pay back the money you borrow right away if you sell your home.
Friends and Family
If you want to avoid the formal application and approval process required from other lenders, you may also consider asking a family member or friend to loan you the money. It’s a good option, especially if you need fast cash and may not qualify for any loan. You might even get a very favorable or no interest rate for the money you’ll borrow.
But though it may seem like an uncomplicated option, note that it can create conflict between you and your family or friends if you fail to repay the loan. Therefore, it’s essential to put a mutual agreement in writing and have it legalized by a notary.
Choose The Best Option
There is no one-size-fits-all solution for your unexpected expenses. It’s important to take your time to research every loan option before you commit to any lender and take the money. Consider also a game plan on how you’re going to pay back the loan. The last thing you want is to make a temporary financial setback into a long-term financial problem.