When a financial emergency strikes, your whole world can fall into a tailspin. While the nature of the emergency can vary, it can inflict monetary and personal stress no matter your financial situation. From paying for flood remediation to an unexpected car repair, a surprise bill is never a welcome sight. But there are ways you can prepare that may help lessen the impact of a costly emergency.
Preparing financially for the unexpected is the most important step you can take. While building a budget, be sure to set aside emergency funds so you have a safety net if needed. If you have tracked your monthly expenses carefully, you should be aware of the amount of money you’re spending every month. Now, triple that figure. Maintaining three months of reserves in a savings account is the recommended minimum when it comes to establishing an emergency fund.
Home Equity Line of Credit
Maintaining a well-stocked emergency fund doesn’t guarantee that you’ll be able to afford every emergency life throws your way. If you encounter a situation that goes above and beyond your three-month reserve, accessing your home’s equity to fund unexpected repairs and payments is a viable option. The difference between your home’s current market value and any outstanding loan balances, or equity, is an emergency fund of sorts. A home equity line of credit may be a good option for financial emergencies because it’s flexible and allows you to borrow money only when you need it, rather than taking out one lump sum as with a home equity loan. This can be beneficial if your costs are constantly changing and the overall total may be unknown.
If you’re not a homeowner or have not owned a home long enough to build the necessary amount of equity for a line of credit, a personal loan is an option to consider. Personal loans come in all shapes, sizes, and terms, so doing your homework now by researching personal loan options may save you time and stress later. Member One, for example, offers three types of personal loans: money line of credit, savings secured option, and debt consolidation loan.
You could also opt to use a credit card you currently carry or open a new account if you experience a financial emergency. If you’re using an existing credit card, select the card with the lowest interest rate possible. Also consider the credit limit and try to put the full financial emergency costs on one card. This will help keep repayments simpler by only having one bill to manage. If you’re considering a new card, do your research! Try to select a card with no annual fee and a low interest rate, and look for one with a low introductory offer. Just be sure that you understand the terms that will go into effect following the introductory period.
Financial emergencies can be frightening, but understanding your options can give you strength when you need it most. There are options and local lending experts available at a moment’s notice to help guide you through the decision-making process.
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