Unexpected expenses can affect our monthly budget, especially if we don’t have any emergency funds set aside. According to a report by the Federal Reserve, only 39% of Americans can pay for an unexpected expense worth $1,000 and below. The rest of the percentage tends to struggle in these situations.
You have several options if you need money immediately to fund your unexpected expenses. These are the following options to consider:
Ask About a Payment Plan
You might be able to put together a payment plan to fund your unexpected expenses. However, this will depend on the type of expense you have. For example, if you need funds to pay a service provider, they might have a program that can let you make monthly or even weekly increments with interest.
For unexpected medical bills, many providers can also allow you to have payment plans to make your healthcare costs more affordable. For example, you can opt to split the amount you owe into small monthly payments. Most of the time, you can repay medical debt without any added interest or fees with the condition of upholding your end of the bargain, which is to make monthly payments on an agreed-upon period.
A payday loan is a great option, especially when you need the money fast to cover your unexpected expenses. Most of the time, you can receive the money on the same day you applied. However, you’ll need to pay it in full with interest on your next payday. If you’re self-employed, there’s no need to worry since self employed payday loans are available.
Taking Out a Personal Loan
Applying for a personal loan might also work out well for you. However, before applying, consider taking advantage of a lender’s online prequalification tool. Doing so can give you a glimpse of the status of your eligibility as well as the potential loan amounts and interest rates. It can also help you save several points on your credit score.
Personal loans tend to be unsecured, meaning you don’t have to pledge any collateral to get approved. This option allows you to get the funds you need in a lump sum. You will repay the total loan amount monthly with interest on a set period.
Using a Credit Card
You might qualify for a 0 percent APR credit card if you have a good or excellent credit score. This type of card provides a promotional interest-free period, usually lasting for about six to twenty-one months.
It would be best to take advantage and spend as much as possible during the interest-free period. Once it ends, you will tend to pay interest on the remaining balance. It would be great for unexpected expenses since you don’t have to worry about paying more than you should due to the interest rate.
If you can’t qualify for a 0 percent APR credit card, remember to ensure having a strategy to repay your balances. That way, you won’t struggle to pay credit card expenses and interest rates in the future.
Credit Card Cash Advances
As mentioned earlier, you can use a credit card to pay for unexpected expenses. However, it’s not helpful when the merchant you’re paying accepts only cash. In that case, getting a credit card cash advance would be best.
This option lets you withdraw money through the ATM or by visiting the bank branch on your credit card account. The amount of cash you can borrow is based on either the set maximum amount for cash advance or your credit card’s limit. It’s vital to know that credit card cash advances have a higher APR than usual purchases.
Car Title Loans
A title loan can grant you money fast. Therefore, it’s best for unexpected and urgent expenses. Most car title loans don’t undergo hard credit checks.
It’s considered a secured loan, so you will be required to pledge collateral, your vehicle title to be exact, to qualify for this option. If you fail to repay the loan, the lender will repossess your vehicle to settle your outstanding debt.
Preparing For Unexpected Expenses
If you’re not careful, unexpected expenses might take a significant toll on your finances. The best way to manage them is to prepare for them in advance. Below are some tips you might want to keep in mind:
- Build an Emergency Fund
- Create and Stick to Your Budget
- Cut Unnecessary Expenses
- Look for Ways To Increase Your Income
To Sum It Up
Having to face unexpected expenses can be a bummer. Lucky for you, there are several options you can choose to cover these expenses. However, it’s still recommended to prepare for unexpected situations. It would be best to start saving now to set up an emergency fund.