Types of Emergency Funds to Consider
Saturday, March 23, 2019, 6:00 PM | Leave Comment
For those that might be in a financial rut, not to worry!
Emergency funds are typically readily available for a variety of situations:
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Medical bills that need to be paid as soon as possible.
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Car accident that requires immediate repairs.
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Court or lawyer bills for a lawsuit or other legal troubles.
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Home or utility bills that need to be paid.
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Paying for a speeding ticket or fine that has a strict due date.
For these unforeseen situations and more, what funding options does someone have?
When in need of emergency funds, here’s the scoop: there are three viable options for inquirers.
Here are those three options:
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Emergency Loans
Emergency loans can be just about any amount, and they all provide people with quick money when they need it. What makes emergency loans convenient is how they are available for most people, even for those with varying degrees of credit, insurance, or income!
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Credit Cards or Lines of Credit
Most of these credit-based emergency funds are available at a person’s bank or financial institution. By having access to emergency funds whenever it is convenient, credit cards or lines of credit seem to be the go-to for most consumers. However, these credit-based options could slowly spiral people into debt. Not to mention, they could help build or break anyone’s credit.
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Borrowing Emergency Money
Whether from a peer-to-peer loan, strangers, or family members, the option to borrow emergency funds from someone is always a possibility. Of course, paying it all back is a huge responsibility. The last thing that anyone would want to do is screw up a relationship with a friend or family member if they fail to repay borrowed funds.
After taking a brief look at all these emergency funding options, there’s clearly one that stands out among the rest: Emergency loans
There are several kinds of emergency loans for people in need of quick financial support—some that people may not have considered.
Different Kinds of Emergency Loans
The loan industry is quite competitive. When people need money now, emergency loans are there to help.
Of course, there are different types of emergency loans for different financial situations and individual needs. But what are those different kinds of emergency loans?
Here are several that most people will run into.
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Auto Title Loans
An auto title loan gives the borrower the option to get money using the value of their vehicle. The biggest selling point is how they provide emergency funds to people with varying degrees of credit.
How title loans work is by “securing” the loan using collateral. The collateral in this case, is the title of the vehicle.
Once the contract is signed, the lender has control of the borrower’s vehicle title. The borrower can continue to drive their vehicle while paying off the loan.After the loan is paid off, the title is returned to the owner. But be informed, as people who default on a title loan (stop paying it), may get their vehicle repossessed by the lender.
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Cash Advance
A cash advance goes by many names. This includes payday loans, salary loan, and payroll loan.
To acquire the emergency funds that someone needs, the agreement is that their next paycheck will be used to pay off the loan.
Unlike a title loan, there is no collateral. However, depending on how much money was borrowed on the loan, a person’s paycheck may not fully pay off the loan.
When this happens, a person’s payday check will continue to be used until the loan is fully paid off.
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Installment Loans
Although most loans operate monthly through an installment, there are several lenders out there that provide this option as a form of emergency funds.
What’s great is installment loans work kind of like a bank loan. Depending on the terms and amount borrowed, this type of emergency loan can be very useful.
Of course, approval on installment loans may depend on numerous factors, one of which may be credit!
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Pawnshop Loans
Walking into a pawnshop, the last thing a person would expect is to get an emergency loan from the same place that sells used belongings.
With a pawnshop loan, a person uses a valuable possession as collateral to get the emergency money they need. For example, a diamond ring could be used to acquire funding.
Once the value of the item is appraised by the pawnbroker, a contract agreement is signed, and the borrower collects their emergency funds.
If the borrower continues to pay off the loan and meet the agreement conditions, their item will be returned. However, failing to pay could mean losing that valuable item for good.
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Home Equity Loan
Of all the emergency loans out there, home equity loans tend to have the longest process. That’s because the loan let’s people borrow against the value of their home.
Because the loan is linked to the borrower’s house, it is safer for banks. Due to the added security, lenders typically offer benefits like lower interest rates, and higher borrowing amounts compared to loans that don’t require collateral.
Not to mention, the interest that the borrower pays may be tax deductible.Although not made for every emergency situation, home equity loans can be helpful if a person decides to put in the time and effort in applying.
How Emergency Loans Help
Another thing to note is that most emergency loans also provide several benefits that aren’t just limited to fast cash.
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They can provide someone with the opportunity to build their credit by paying the loan on time.
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As people build credit, they may have the ability to refinance these loans for better payment options.
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Most emergency loans give people the option to fully pay off the loan before the end of the term without any penalties.
Be sure to research what emergency loans could be the right choice for you, and always research other options that might be available!
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