The Fastest Solutions for Emergency Expenses
When an emergency expense crops up, you need to react fast. You can’t push the expense aside and wait for a more convenient time to deal with it. You need to find a solution ASAP.
These are three potential solutions you can turn to whenever you’re hit with an emergency expense.
An emergency fund is a personal collection of savings with the sole purpose of paying urgent, unplanned expenses without disrupting your routine budgetary spending. Some financial experts recommend saving three to six months’ worth of your expenses in this fund. With that substantial sum saved up, you can handle just about any emergency expense that comes your way.
An Important Tip for Emergency Funds:
Emergency funds are only fast solutions when they are accessible. So, you need to be careful to store your emergency fund in an accessible bank account. A standard savings account, a high-yield savings account or a money market account (MMA) are all good options for storing your emergency savings. Any of these accounts would allow you to access your balance to make a payment at a moment’s notice. With an MMA, you have the option to make a fast payment via debit card, written check, cash withdrawal or money transfer with the help of a P2P app.
What about a Certificate of Deposit? While a Certificate of Deposit is an effective savings tool with a high-interest rate, it’s not known for its accessibility. A CD will have restrictions on withdrawals before the account’s maturity date — this could be years away. If you try to access your savings before that maturity date, you could face an early withdrawal penalty.
Do you have a credit card? Of course, you do. The average American has 3 credit cards sitting in their wallet. So, you likely have this solution in your back pocket.
When you don’t have enough savings in your emergency fund to cover an emergency expense, you can charge it to your credit card. This will give you time to pay off the expense during your card’s grace period. And if you don’t do it by then, you can whittle down your balance through your card’s monthly billing cycle.
An Important Tip for Credit Cards:
You should only use your credit card to cover an emergency expense when it doesn’t have a high balance on it. You don’t want to add another transaction to an already high balance. In the worst-case scenario, you could accidentally max out your card.
What’s the problem with maxing out your card?
- It eliminates all of your available credit in this account. Any additional transactions on it will be declined.
- It gives you a higher debt load to pay down.
- It raises your minimum payments.
- It can lead to credit limit fees.
- It can lower your credit score.
If you don’t have savings in an emergency fund and you don’t want to use a credit card to cover an urgent expense, you could turn to an online loan as a solution.
Choosing an online loan could give you faster results than applying for a bank loan in person since you don’t have to schedule an appointment and travel to the bank branch. You can fill out an application at home, as long as you have access to a computer and a strong internet connection. Filling out the application shouldn’t take very long. You could be done in ten minutes!
If your application is approved, you can access your funds to cover your emergency expense in a short amount of time. You don’t have to sit around and wait for weeks to get your hands on the loan.
An Important Tip for Online Loans:
Do your research. Not all online loans are the same. You should look up the different types of direct deposit loans and personal loans that are out there before you need to apply for one of them. They will have different benefits, limitations and eligibility requirements.
You should also check where the loan is accessible. Not all online loans will be accessible to residents in your state. So, narrow your search. You don’t want to get automatically rejected because of your address.
Time is a luxury. You won’t have time to waste when you’re facing an emergency expense. So, consider one of these three solutions and pay it off right away.