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Emergency Cash Loans

Unexpected events, often costly ones, will blindside all of us at one time or another; it's inevitable. The impact of these events is much less devastating if you are prepared. Of course, your best scenario to cover costs is to have an emergency savings fund. Realistically, most people simply have little or nothing in reserves to pay for an emergency. You may have to turn to other resources to cover your expenses.

Loans from family or friends

All of us, at some point, will turn to family or friends for financial assistance. What better time than an emergency to get a little help? But, just because someone close to you may have the resources, don't expect them to merely hand some over to you. Money can be a very sensitive issue. Many people simply don't lend money to friends or relatives because of potential stress on the relationship. Perhaps you have been notorious for not paying loans back in a timely manner, or at all. If you can't turn to your loved ones for financial support then you may want to consider the following options.

Bank loans

Emergency cash loans from the bank can be obtained through the following means:
  • Home equity loan - A home equity loan is a second mortgage (not to be confused with a home equity line of credit or HELOC) which allows a homeowner to borrow money by using the house as collateral. Creditors are more likely to grant the loan because they can repossesses your house if you default on payments. Because you are aware your house is on the line, you are more likely to make your payments; which creditors know as well. A home equity loan is a good option for borrowers who need a relatively large amount of money or who don't have good credit. These loans also tend to carry lower interest rates and payments may be tax deductible.

  • Home equity line of credit (HELOC) - This is where homeowners use the equity in their home as collateral. They establish a line of credit based on their equity and borrow against it. The idea is to only borrow what you need. You can always borrow more later as long as you stay within your maximum limit. Your line of credit will have a draw period and a repayment period. During the draw period, you borrow money and use your line of credit. This may last for 10 years or so. During the repayment period, you repay principal and interest on the loan. The bank feels you are a safe credit risk because they assume you will repay the line of credit so you won't lose your home. HELOCS typically have variable interest rates and do have closing costs which you will need to consider.

  • Unsecured loan - Unsecured loans are often referred to as "signature" loans because the bank has nothing but your signature. There is no collateral for them to go after if you default on payments. For this reason, interest rates are usually higher and it is necessary for you to have good credit to get an unsecured loan.

An added note; don't overlook credit unions when you are seeking a loan. Credit unions may have better rates and terms and may be more willing to work with you than a bank.

Credit Cards

If you are having a difficult time coming up with emergency funds and can't get a loan from a bank, you may have to turn to credit cards. Of course this is not the most ideal situation, but when you don't have food on the table or you need transportation to get to and from work, you may have to resort to using credit. If you have to use credit to cover everyday expenses use the lowest interest rate card possible and pay it off as quickly as you can. Using credit is a temporary solution buying you some time to find healthier alternatives.

Payday loans - The Worst Type of Loan Possible

As convenient, innocent and safe as payday loans sound, they can be very dangerous. Millions of na´ve consumers are enticed by the persuasive advertising of payday loan operations who offer a quick fix. You might feel immediate relief, but it is very temporary. Cash advance companies are out to make as much money as possible, and they do make a killing. They count on their customers' ignorance, desperation and belief that someone really does want to help them. Most of these customers don't read the terms and conditions of the payday loan, or if they do read them, don't fully understand what they are agreeing to.

Here's a basic explanation of how it works:

You write a check or promissory note for how much you are borrowing, plus an added fee. You leave the check with the lender who cashes it at the end of the loan period, usually only a week or two. If you can't repay at the end of your loan period, you can extend it or "roll it over"; but be aware that fees will continue to accumulate. The annual percentage rate (APR) on loans of this nature are astronomical. It is common to be charged an interest rate of over 400% on payday loans which vastly exceeds what conventional lenders would charge.

If you are in dire straits and simply don't have any other options, you may have to resort to a payday loan. But do not make it common practice or your situation will just continue to spiral downward. Even though you may feel trapped by your financial circumstances, there are many options available; solutions that won't make your situation worse like the ones mentioned above. To learn more about positive alternatives, be sure to check out the other articles in this month's newsletter. With a little creativity, sacrifice, determination and optimism you will see that there is a lot you can do to improve your financial situation and safeguard yourself against future emergencies.