What will happen when any emergency fund is not sufficient? You might get hold of quick and easily accessible cash source. One of it being short term loans. But short terms loans come with lots of cons and hence if you can then look out for these alternatives.
Get In Touch With The Creditor:
Do not panic if you have missed any payment or feel like you will miss one. At first get in touch with your creditors. Some of them will be working out a plan with you in case there is any emergency. For instance many utility companies along with hospitals will offer lower rate of interest including 0% interest rate payment plans to ensure that past due balances are cleared off during several months.
Take Help From Friends and Family:
If you require a fast short term loan, do not feel embarrassed to contact your friends and family. You can get some help from them to get free from the debt cycle. Instead of getting bothered by any predatory loan it is better to ask for help from your closed ones.
Plan A Budget And Save For Emergencies:
Have a look at your income as well as expenses. Ensure that you never spend more money than you actually earn. Avoid any unnecessary spending of money. Also try to build savings so that during emergencies, there is a cushion for falling back on rather than turning to any credit for aid.
If you are employed and in a financial problem, then this loan will be an excellent option for borrowing. It is much better than a short term payday loan. Since you are borrowing it from yourself, the interest that you will be paying back will actually be the money that you are putting back in your own retirement fund. You can borrow till $50,000 or may be half of the total money present in your account; the one which is less. The repayment time is within 5 years and quarterly payments are at least required.
Homeowners who are aged 62 years and more have an option of a reverse mortgage during financial crisis. With the help of this, a property’s equity will get converted into a tax free payment for you. Money can be taken up front in the form of a line of credit. You can receive payments every month for a specific term or may be for that time till you reside there. You can also select mixed options. You will be keeping the title but lender will be paying every month for buying your home with the passage of time. As long as you live in that home, there is no requirement for repaying the loan. After you move out or die, the loan will become due and your house needs to be sold for loan repayment.
Avail A Credit Card Cash Advance:
If you borrow any cash against the line of credit of your credit card on the card, then it is known as a cash advance. Cash advance can be availed during emergency. If you do not wish to apply for a short term loan, then cash advance can be thought of. But they come with high rate of interest and extra fees. The APR of a cash advance is 5% high then purchase APR. You will also be incurring a 3 or 5 % fee on the every cash advance that you will take. It may not be a perfect solution, but little cheaper than the short term payday loan or title loan during urgent cash crisis.
Look Out For HELOC:
To cover up short term emergency requirements, you can leverage your home equity. A HELOC better known as home equity line of credit is one revolving line of credit extended to any homeowner who uses their home as collateral. The amount of money that you will be able to withdraw will be depending in the value of your home, the remaining balance of the mortgage, household income and credit report. HELOC will let you borrow the maximum money or may be as much as you require. Choose the schedule for repayment and you can set it for less than 10 years or even more than 20 years. But by the end of the term of the loan, the complete balance must be cleared off. You will be paying the interest on the borrowed amount. But you can deduct it from your income tax. An unemployed person will hardly be approved for this type of a loan.
Although short term loans are useful for personal and business use but since they come with a short amount and tenure along with high rate of interest, people are seen to avoid it if possible. During times of emergencies it is better to opt for alternatives to short term loans.