No one is immune to unexpected expenses. Whether it’s an unexpected car repair, a medical emergency, or a broken appliance, at some point in our lives most of us will find ourselves in need of extra cash. And when that happens, it’s important to know about the different ways you can get the money you need. Here are four proven ways to deal with unexpected expenses.
1. Short-Term Loans
If you have an unexpected expense and need cash fast, a short-term loan can be a good option. With a short-term loan, you can borrow the money you need and repay it over a short period of time, typically within a few months. This will, of course, depend on where you're located. For example, the repayment period for Direct UK payday loans can be anywhere from one month to a year. On the other hand, US payday loans have to be paid back within two weeks. Payday loans are typically easy to qualify for, even if you have bad credit. Other short-term loans include personal loans, which can have repayment terms of up to five years, and auto title loans, which are secured by your vehicle and typically have to be repaid within 30 days.
2. Credit Cards
Another option for dealing with unexpected expenses is to use a credit card. With a credit card, you can borrow the money you need and repay it over time, typically with interest. This can be a good option if you don’t need the cash immediately and if you think you can afford the monthly payments. Just be sure to use a credit card with a low-interest rate and be mindful of the fees. When using a credit card you should always keep in mind that it has a direct impact on your credit score. This is because credit utilization, which is the amount of debt you have compared to your credit limit, accounts for 30% of your FICO score. So, if you carry a balance on your credit card from month to month, it will likely have a negative impact on your score.
3. Emergency Savings
If you have an emergency fund, you can use that money to cover unexpected expenses. An emergency fund is a savings account that you set aside specifically for unexpected expenses. Ideally, you should have enough money in your emergency fund to cover three to six months of living expenses. This will give you the security of knowing that if something unexpected comes up, you have the money to cover it. Of course, it's not advisable to dip into your emergency fund for non-emergency expenses. If you do, you should make a plan to replenish it as soon as possible. Like most things in life, an emergency fund is something you should plan for in advance. It takes time to build up enough savings, so it’s important to start as soon as possible.
Most people use it as a last resort, but if you're strapped for cash and you need it yesterday, a pawn shop can be a good option. With a pawn shop, you can take out a loan using your valuables as collateral. The amount of the loan will depend on the value of your item, and you typically have 30 days to repay the loan. If you don’t repay the loan, the pawnshop will keep your item. Pawnshops are a good option if you need cash quickly and you have something of value that you can use as collateral. Just be aware that you could lose your item if you don’t repay the loan. You'll also usually get much less for the item than it's actually worth.
No matter how well you plan, life always has a way of throwing things your way. And when that happens, it’s important to know about the different ways you can get the money you need to cover unexpected expenses. Short-term loans, credit cards, emergency savings, and pawnshops are all viable options. Just be sure to weigh the pros and cons of each before making a decision.