A financial emergency is a scary situation. If you’re facing loan payments, medical expenses, or repair costs you just can’t afford, you may feel helpless and unsure of what to do. While there’s no easy fix for this type of situation, there are a few paths that you can consider:
Consider applying for a personal loan at a rate more affordable than credit cards.
Ask for a gift or loan from someone close to you:
If you decide to borrow from loved ones, consider signing a personal loan agreement that spells out the loan basics such as the amount and when and how it will be repaid. If you need help drafting your agreement, free promissory note forms are available online. A gift contribution may be an option, though there are limits before taxes will be incurred; consult with a tax professional for more details.
Apply for a credit card:
If you’re in a short-term money crunch, applying for a credit card may be a viable option. If you do decide to take this route, be sure to find a card with a low interest rate and create a repayment schedule you know you can stick to.
Apply for a loan:
If you have a relationship with a bank, you may consider applying for a personal loan, which might have a rate more affordable than credit cards. For any option you’re considering, however, do a comparison to make sure you can afford interest charges and fees over the repayment period of the loan.
Once you get past this situation, be sure to establish an emergency fund where you maintain funds solely for financial emergencies. This will help ensure you have a financial cushion the next time a crisis arises.
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