Articles - Archived Feature

When You Need Cash Fast

It's a fact of life—sometimes you need cash fast. What do you do—use your savings, apply for a loan, pull funds from a credit card or take from your retirement account? Being prepared for emergencies reduces stress and anxiety if something unexpected occurs.

First and foremost, you never want to touch money placed into a retirement account. Not only is this money set aside for a particular reason—not a short-term cash crisis—but early withdrawals often mean stiff tax penalties.

Having an emergency fund can help eliminate the need to worry when cash is needed. The rainy day, or emergency, fund is money set aside to take care of unexpected expenses as they occur. It should contain three-to-six months worth of living expenses. These accounts allow immediate access and, if possible, still provide a decent rate of return. If cash gets used from the account, it is essential to replenish the funds.

Another option is to consider a salary advance loan (SALO). At Local Government Federal Credit Union, SALOs can be obtained for up to $500, have a very reasonable rate and carry no fees. In addition, to help members begin saving for the future, a Salary Advance Cash Account is established for every SALO. Five percent of each loan advance is placed in this account and pledged as collateral for the loan. The account belongs to the member, earns interest and has restricted access, meaning withdrawals are permitted only with authorization from a Credit Union loan officer.

You may also apply for a personal loan, which can be open- or closed-end. The closed-end loan is for a set term; the open-end loan is not. The open-end loan can also be used for future borrowing.

Try to avoid cash advances from credit cards unless there is no penalty. When a cash advance is taken from a credit card, the interest starts immediately. That interest is usually at a higher rate than your purchase rate. If you decide to go with this option, it is essential you pay your entire balance as soon as possible. Keep in mind: because the cash advance balance carries a higher rate, it will be relegated to the last part of your account balance to which payments will be applied.

Emergencies are unforeseen, so know your options and keep them open.