What To Do When You Don’t Have Cash For Unexpected Expenses

Just Not Enough:  When Your On-hand Cash Isn't Enough for Your Unexpected Expenses, You Have Options Available

If even rather small unexpected bills, such as a car repair, unexpected out-of-town trip, or plumbing emergency, put you in a financial bind, you are not alone. In fact, almost half of Americans say they do not have enough cash to cover a $400 emergency expense. Families have a number of options when they do not have enough funds to cover these expenses in cash, and some of these choices are better than others.

Delay Expense

In some cases, it’s possible to not pay the bill, or at least not pay it all at once. If the car needs air conditioner service, it may be a good idea to put that bill off until the weather turns warm. Or, if a family member must go to the hospital for emergency care, the hospital may accept a partial payment.

However, as a general rule, it is a bad idea to put problems off until later, because they usually get worse. If the AC is on the fritz, there may be a more serious electrical problem that will become more complex, and more expensive to fix, the longer it goes unattended. And, while the hospital may wait a month or so to demand the rest of its money, there’s no guarantee that next month will be better financially than this one.

Credit Card

Largely because they are so convenient, many people are tempted to put unexpected bills on credit cards, thinking they will just pay the expense later.

Roughly a fourth of Americans do not have a credit card, so for them, this option is entirely off the table. For the remainder, spending money that you do not have is usually a bad idea. While it is possible to extend payments for several months, the interest adds up quickly. Responsible use of credit, and not irresponsible use, is a key to financial stability.

Borrow from Friends or Relatives

In most cases, friends and relatives do not charge interest, will not take adverse action if you do not pay on time, and may not even want the entire amount repaid. So, from a purely financial standpoint, this option should be at the top of the list.

However, there are obviously some non-financial considerations. Many people do not have friends or relatives who they can turn to in sensitive situations like a financial emergency. Moreover, such money nearly always comes with strings attached, and in many cases, these strings are too much to bear.

Commercial Loan

Bank loans are probably not an option. Banks usually do not want to lend small amounts of money (or at least an amount the bank considers “small”), and even if they are willing to loan the funds, the processing time is usually quite long.

Online loans, however, are another story. Installment lenders specialize in loans under $1,500 and processing often takes a few seconds as opposed to a few weeks, so these loans are custom-made for emergencies. They should only be used for these purposes, because the interest rate is often high.

When a financial emergency disrupts your budget, an online installment loan may be the best way to restore balance.

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