You Need Money Now
I’ve quoted this fact about a million times already, but it bears repeating because it’s so terrifying: the majority of Americans don’t have adequate emergency funds. 57% of the country would have to go into debt if hit with a mere $500 expense.
This is a problem, because major expenses crop up all the time when you least expect it. Your kid might need some sort of medication, and that could cost God-knows-how-much. Your toilet could break down, and the average cost of fixing a toilet in 2017 is about $200. Or perhaps you rely on your car to get to work, and you just discovered that it was actually an alien robot that came to our planet to continue to wage a civil war that started on their own doomed planet.
That last one happens more often than you think. Celebrities Mark Wahlberg and Shia LeBouf had their experiences with these robots in disguise detailed in the Michael Bay documentary Transformers.
This is why you need to start now to build an emergency savings account. And because your emergency cash should be just out of easy “at a whim” reach but still accessible in an emergency, it’s why you should have an account with an online bank as your choice for those emergency funds.
But, as we know, unplanned emergencies don’t wait until you have a nice little emergency fund. No, otherwise they’d be “planned” emergencies, and then they probably wouldn’t be “emergencies”, and then they would probably would be avoidable, and then–
Anyhoo, the question becomes what to do if you need that emergency money but you don’t have an emergency fund. So here are 4 places to get emergency cash without an emergency fund.
1) Tap into your home equity
This is why I recommend that all homeowners have a Home Equity Line Of Credit.
The first thing most people would do is max out their credit cards. But if you own a home, you may be able to borrow from its equity in order to meet your expenses.
A Home Equity Line Of Credit (HELOC) is like a big credit card, but with your home as collateral. As a result, your rate will be extremely low compared to personal unsecured loans or credit cards.
Of course, you need to pay it back to avoid foreclosure, but it’s much better than maxing out your credit cards. The average rate on a credit card is over 15%. Your HELOC’s rate would likely be less than a third of that. It’s good to have when your assets are tied up in your house.
2) Borrow from your retirement
Of course, you’d rather retire from your borrowing, but like we said: “unplanned emergencies”.
If you have a 401(k), you may be sitting on a ton of cash. Of course, you probably can’t take from it because you’re under 59 1/2.
You’ve been putting in pre-tax money every paycheck. You’ve never paid a penny in taxes on it yet. But it’s legally earmarked for retirement. It’s a 401(k) (or a 403(b) or a 457 or whatever). If you try to withdraw it, the government will tax you into oblivion and the IRS will steal your soul.
But you can borrow from your 401(k) balance. You knew that, right? And if you borrow and pay it back, that does not count as income and you don’t pay taxes on it.
Now, of course there are some caveats. You need to make sure that your 401(k) plan administrator allows for loans. You need to see how much you’re allowed to take, whether you pay it back in installments or in a lump sum, and evaluate whether or not you can pay it back at all.
But it is a loan from yourself to yourself, so there’s no credit check. And at least you’re not putting your house up for collateral (though you are essentially putting up your retirement instead). If you’re going to go into debt, you may feel more comfortable borrowing from yourself.
3) Payday or short term loans
Okay, so you don’t have a house or retirement assets to fall back on. If you have a job and a bank account, your next bet may be to get a payday loan.
A payday loan is a short term high interest loan usually due by your next paycheck. Traditional payday loans (payday loans and short term high interest loans do take different forms, but the basic concept is usually the same) will have you give a postdated check as collateral, and the lender will cash the check and overdraw your bank account if you don’t pay it back.
Remember that they have high interest rates (they are short term loans for people with no credit and no assets), so you want to find reputable lenders that won’t keep you in a spiral of crippling debt. A reputable payday lender, such as Check Into Cash, will give small limits on how much you borrow (up to $1,000) and advise you that these are only short term solutions for unplanned expenses. And I’ll tell you the same thing; remember that these are for emergencies ONLY, just like a bank’s overdraft coverage.
If you go with Check Into Cash for a payday loan, you can either apply online or look for one of their locations. Make sure you search locally so you’re not getting locations out of state (so search for Check Into Cash Locations in Lexington, Kentucky if you live in Lexington, Kentucky, and don’t ask me why I singled out Lexington, Kentucky). If you go with another payday lender, make sure they are at least a member of the Community Financial Services Association of America so you know they are reputable and conform to the industry’s best practices.
4) Pawn something
We’re really going for the last resort, but if it’s a true emergency and you have no other choice, you may have to pawn something.
For those who don’t know, pawning something means to go to a pawn shop with an item that they will appraise and loan you money against. The item stays with the pawn shop as collateral. Default on the loan and expect to see your item for sale on their showroom floor.
Of course, the amount of money you’ll get from the pawn shop depends on the appraised value of the item. And even though there’s collateral, you can still expect the interest rate on a pawn loan to be as high as 25% per month. That’s not an APR; pawnshops’ rates are monthly. Make sure you take that into consideration.
Pawn shops have a reputation for being seedy and illicit, but they are reputable and regulated businesses. They are perfectly viable and legit sources of quick cash for emergencies. Just make sure you’ve done some research on the value of your item before you walk in, lest the pawn shop offer you way less than what you should really get.
An unplanned emergency could strike at any moment. And true emergencies are costly and absolutely necessary to fix.
You should always have an emergency fund of at least 3-6 months of expenses ready to go in case such an event happens. If you don’t have an emergency fund, you should start building one now.
But know that if something happens tomorrow, you can tap into other assets and sources of funds for that emergency cash. Just please make sure it’s a true emergency, not a “shopping emergency” or anything like that.
Readers–What do YOU think!? What other sources of emergency cash exist for those unplanned emergencies? Have any of you had to go down these routes? Leave your thoughts in the comments below!
Disclaimer: This is a sponsored post. I was paid by Check Into Cash to write and publish it. As always, I’ve researched them before accepting any offers and found them to be a reputable and ethical company that I would use myself if the need arose. Always do your own research before making any sort of financial transaction or commitment, but know that my opinions are always my own regardless of compensation.