When a sudden expense pops up, it’s always best to pay for it with cash. But what if you can’t? If you don’t have emergency savings and suddenly face a car repair or leaky roof, you may have to find another way to cover your sudden expense. Here are four options to consider.
Personal loan for big expenses
Personal loans may or may not be a smart alternative to credit cards. If you need to borrow between a few hundred and a few thousand dollars for a one-time expense, a personal loan may be your best choice.
An open-ended loan is a flexible loan with unlimited advances against the approved credit line. A closed-ended personal loan allows you to choose a repayment period up front, so you know you will be making progress toward paying down your loan each month.
Credit cards for small expenses
If your expense is small enough, a credit card may be your best option. You may also need the convenience of using your credit card. You can then pay back the balance over a timeframe that you choose.
HELOCs for major improvements
Another option is a Home Equity Line of Credit, or HELOC. Like with credit cards, a HELOC will have a credit limit. Your limit is based on the equity in your home. You can borrow cash whenever you need it to make home repairs or improvements, without having to apply for separate home equity loans.
Borrow money from someone you know
Asking a friend or family member for a loan may also be a reasonable option. You may find you have a longer time frame for repayment and little to no interest. However, if you fail to repay what you’ve borrowed, you risk ruining a personal relationship. If asking a friend or family member for money, be sure you can pay it back as promised.
Whatever your cash needs, research your options to make sure you’re borrowing safely at affordable rates. Check with your bank or credit union for help with credit options.
Article provided by Local Government Federal Credit Union.
The advice provided is for informational purposes only. Consult your bank or credit union representative for additional guidance.