Finding yourself strapped for cash with an emergency expense on the horizon is a distressing experience that can leave anybody wondering what to do next.
Fortunately, there are a number of financing options to consider that can provide a borrower with the funds they need to meet their financial obligations.
Learning about these different types can help a person figure out which financing option is best for their needs.
What Is An Emergency Expense?
An emergency expense is any type of sudden expense in which your built-up emergency fund is required to meet the expense.
Some common emergency expenses that people are faced with include: major home repairs, medical bills, or even vehicle repairs.
However, an emergency fund is built up over years and turning to it for major emergency expenses can quickly deplete it.
As a result, some people choose to seek out financing from lenders in order to meet their financial obligation.
5 Best Financing Options For Expenses
Fortunately for those seeking financing, there are a number of different options to consider in order to get quick access to cash.
Consider some of the following financing options for your needs:
1.) Personal Loans
Personal loans are short-to-long term loans that provide borrowers with a lump sum of money up front.
Typically, personal loan amounts range from $1,000-$100,000 and come with an interest rate that ranges from 6%-36%.
Lenders will run a credit check on borrowers prior to approving this loan as it is an unsecured loan that does not require a form of collateral.
Due to this credit check, personal loans are not easy for people with poor credit scores to receive, meaning that you should have a credit score of at least 620.
2.) Title Loans
Title loans are another common loan type that borrowers consider when in need of smaller amounts of cash.
By taking out a loan against your vehicle title, borrowers can gain access to 25%-50% of the value of that title.
This secured type of loan has a quick repayment period, with the average tenor of the loan being just 30 days.
Title loans tend to have monthly financing fees, as opposed to an APR, and a 25% monthly financing fee is average for most lenders.
There are very few requirements associated with applying for a title loan, with the only real requirement being that you need to show proof of ownership of the vehicle.
3.) Home Equity Line Of Credit
A home equity line of credit provides borrowers with access to funds up to a certain amount, as opposed to a lump sum.
This value is based on the amount of equity you have in your home and can be as much as 75% of that equity.
Therefore, if you have a $1,000,000 mortgage that $300,000 has been paid off on, your equity is $300,000.
With a home equity line of credit, you could gain access to up to $225,000. The equity in your home serves as a form of collateral.
4.) Home Equity Loan
Similar to a home equity line of credit, a home equity loan provides borrowers with a lump sum of money based on the value of the equity in their home.
These loans generally have a tenor of five to fifteen years, dependent upon the size of the loan.
Unlike the home equity line of credit, a home equity loan has a fixed interest rate similar to how a mortgage works.
5.) Balance Transfer Credit Cards
Finally, balance transfer credit cards are another common form of financing that people use.
As opposed to a loan, balance transfer credit cards allow you to transfer credit card debt from one or more cards to another account.
This allows a person to consolidate existing debt under one account while also providing access to a credit limit.
Balance transfer credit cards often have an introductory 0% APR which means you won’t pay any interest for a certain period of time, typically one year.
This means that a person can pay off a large portion of their debt without needing to worry about interest for a given period of time.
Secure Your Needed Funding Today
Getting quick access to cash when an emergency expense is looming can reduce a large amount of stress.
However, with all forms of debt it’s important to be cognizant about your budget to ensure you don’t add more stress into your life.
Only take out debt when you are certain you can meet all repayments on time and in full.