Money’s short. Too short, in fact — you have a payment coming due. Where can you come up with the money — fast?
*Avoid a loan, if you can. Can you take a temporary job, or pick up some overtime at your regular job? (Keep reminding yourself this situation IS temporary!) Can you sell something, rent out a room, dog sit or do something else to bring in extra income? Perhaps you could barter your working skills shoveling show, cleaning or something else? Self-help websites like Craigslist offer all sorts of options, at no extra cost, but others, like Fiverr.com, are also possibilities. It never hurts to ask…or offer.
*Who better to borrow money from, than yourself? Can you temporarily use your emergency fund? Any stashed-away cash? Are there funds you’ve been setting aside for your kids’ education? If you can pull from these funds, great — but pay it back. You’ll need it in the future.
*Can you use the money from your 401K? If you’re older than 59 1/2, funds can be withdrawn without heavy penalties. (As of this writing, it’s 10% – plus whatever taxes you must pay.) And in some cases, you can use 401K funds by proving ‘financial hardship.’ Another option is to take a loan against the account, for medical or educational expenses; you still have to pay it back, but at least you’ll help your prospects in the long run.
There is one way to quickly get your hands on your 401K funds, at least temporarily — and that is a new job. You’re allowed to pull your 401K funds when switching employers. True, you have to re-deposit that check within 60 days — but you’ll have the money as a temporary stopgap. More about 401K options are here.
*There’s always the Bank of Family, especially Mom & Dad… as long as they’re willing and/or able. Set up a contract with clear repayment terms, and stick to it. (Paying interest is yet another sign that you’re taking this seriously.) Their love — not to mention their faith in you as a clear-thinking adult — is priceless. Don’t mess that up by defaulting on the loan.
*Can you take an advance on your credit card? They’ll charge you interest — and a fee, if you don’t pay it off within the month period. But it may be better than other options. (See below.)
*Do you belong to a credit union? They’re in the business of giving loans — provided, as one site says, “your need is legitimate and financially justifiable.” Dress well when you meet with the credit union officer, think about what assets you can pledge as collateral, and be honest upfront about any questions they ask — even if they don’t reflect well on you.
For your part, you should check out any financial institution you’re hoping to borrow money from. Are they reputable? What kind of options are they offering? Do you understand the terms of the loan? What will you end up paying over the life of the loan? Are there penalties for paying it off early? Don’t accept what you’re told verbally, until you can verify it in writing. Know what you’re committing to before you sign anything.
*Can you borrow the money through a social group you belong to? Even if they don’t have a loan program, many of these groups — everyone from AARP to universities – have some affiliation with a credit card program, which you could use for cash advances. Just make sure, as previously mentioned, you understand the terms.
*Try a more unusual source. It’s called ‘peer to peer lending,’ where a group of investors is willing to take a chance on lending money to you, for a higher interest rate than they’d get elsewhere. Prosper.com and Lending Club are the best-known of these groups, and advertises fixed rates and low monthly payments. The better your credit, the more you’re apt to get the loan you’re asking for. Even so, the interest rate ranges from 7% to an intimidating 35 1/2%!
*Avoid payday loan or tax refund advance programs. Their interest rates are sky-high — a payday loan can legally charge literally double, triple or quadruple your original amount — and stick on extra fees for the privilege! Once you do get extra funds, you’ll be hard put to repay them, without having to roll over the original loan. Or your once-hefty income tax refund will be whittled down to a shadow of itself. And that, of course, means more coming out of your pocket, not less, in the long run.
Consumer Federation of America has a helpful chart, comparing rates for taking an advance on a credit card (high and low-interest and fees) to getting a personal loan…or a payday loan, instead. (See the chart here.) Payday loans are by far the most expensive — literally up to more than 400% to borrow as little as $300 for a few weeks!
Don’t let yourself fall into that trap. Try any and all other alternatives — including going without. The price you have to pay, otherwise, may not be worth it.