10 Alternatives To An Emergency Loan
Need money in a hurry? An emergency loan might seem like a convenient way to access cash when you’re desperate, but such loans have their drawbacks. If you’ve got a low credit score or you’re unable to pay the loan back quickly, you can expect to pay a lot of money in interest fees in the long run. As a result, such loans can often be the most expensive way of funding emergency costs.
Fortunately, there are other ways to get the funds you need in an emergency. Here are just a few alternatives to emergency loans that could be less costly.
Ask about payment plans
Whether you need to hire an emergency plumber or pay for a loved one’s funeral using a funeral service, it’s always worth asking directly with the vendor whether you can pay in installments. Many services are now offering this option – sometimes with no added interest fees. As with taking out a loan, you’ll be paying in installments, but it could work out a lot less expensive in the long run.
Use your savings
If you’ve got some savings set aside, you could consider dipping into these. This might not be ideal if you’ve been saving towards a goal such as a house or a vacation, but providing that you don’t need to borrow a lot of money, you may be able to take out this money and pay it back quickly, allowing you to continue working towards your goal. Meanwhile, for future emergencies, it could be worth setting up a separate emergency savings account that you can dip into purely for unexpected costs.
Turn to family and friends
Your family and friends may be able to offer you the funds that you need. You may also be able to come up with a more flexible way of paying it back, plus they likely won’t charge you any interest. Of course, you need to stick by your word when borrowing from family and friends – fail to pay back the money and you could damage relationships with those around you.
Ask your employer for an advance payment
If you only need a small amount of money, your employer may be able to offer you some or all of your next monthly wage in advance. In some cases, an employer may even be willing to lend you a loan, taking small amounts off each of your upcoming monthly payments in order to pay it back. You’ll likely need a good relationship with your employer to request this and you should get the agreement in writing. Most employers won’t be willing to pay out a salary advance more than once, so don’t make it a habit of asking your employer for advance payments.
Try peer-to-peer lending
Peer-to-peer lending could be another alternative way of borrowing money in an emergency. These sites allow you to connect with everyday people who may be willing to lend to your cause. You’ll have to pay back interest, but it will generally be a lot less than any traditional loan. There are multiple peer-to-peer lending platforms out there to choose from – compare different ones to get the best rates.
Try credit unions and specialist lenders
Credit unions are community-led financial services from which you can borrow money – often at a lot cheaper interest rates than a traditional loan. When joining a credit union, you may also get other benefits such as life insurance or the option to donate money into a savings account with each loan repayment. On top of this, credit unions may be able to offer financial advice if you are in debt. On top of credit unions, there are also specialist lenders out there that may be able to offer low-interest and no-interest loans in the event of certain circumstances. For instance, there are lenders that offer low-interest medical loans and others that offer low-interest funeral loans.
Sell unwanted belongings
It’s possible that you may be able to sell items in your home to make up some or all of the money that you need. If you want to make a quick sale, you may be able to approach second-hand stores and pawnbrokers, although they’ll likely buy or pawn these items for less than their actual value. Selling independently via sites like Facebook, Gumtree and eBay could allow you to get a better price, but there’s no guarantee of a quick sale.
Seek legal compensation
Certain costs may have been preventable if it wasn’t for someone else’s wrongdoing. In these cases, you may find that you’re eligible for legal compensation. For instance, if you were injured in a road accident as a result of another driver’s carelessness, you could find that you’re able to make a legal claim with the help of a personal injury lawyer– and that this money could help pay for any medical expenses. You may not be able to win money straight away, which could be the one drawback. That said, even if you have to take out a loan, the eventual money you earn in legal compensation could be used to pay this off early and reduce costs.
Check your insurance coverage
Sometimes people forget that they are covered by insurance. There are many new items nowadays that come with a warranty when purchased. For instance, if you bought a new refrigerator in the last year and it has broken down, you could find that it is still covered by a warranty. Meanwhile, if you have home insurance, you may even find that you’re covered against loss of certain contents – which could include items lost while not at home such as a laptop lost while on vacation. Some banks may even offer free travel insurance.
Seek help from local charities
If you are financially struggling and have been hit by an expensive tragedy, you may even find that there are charities out there that are willing to donate money to your cause. Perhaps you recently lost a loved one or your home was severely damaged by a natural disaster. In these cases, there will almost certainly be a charity out there dedicated to your cause.