Responding to financial emergency

If the financial emergency is on your doorstep, you are too late to start a savings account for this situation. If you have a savings account already for this purpose, you are likely to expect a quick recovery. If you don’t have an emergency savings account, you may still be in luck if you have these options to exercise:

Consider selling off your assets

What you want to think about is selling your nonessential possession into quick cash. Think about selling such items:

  • extra vehicles
  • motorcycles
  • jewelry
  • boats
  • snow mobiles
  • artwork
  • extra items in your garage or house (consider holding a garage sale)
  • jet skies
  • golf clubs
Considering selling what you don’t need or rarely use is one way to get cash.
Considering selling what you don’t need or rarely use is one way to get cash. Of course, selling expensive assets in an emergency may not bring top dollars.

Not only you may get quick cash for selling some of these assets but you may also elminate some extra burden of making loan or insurance payments and other expenses! If, for example, you sell your second car, you will save on any monthly loan payments, car insurance, maintenance costs, etc.

A boat for sale by its owner
A boat for sale by its owner

Use credit or borrow against your home

If you have don’t have any assets to sell or your assets don’t cover what you need for you financial emergency, think of borrowing from your credit cards or using home-equity line of credit. In any case, not only will you be liable for paying what you have borrowed but also interest on the borrowed money. If you have the option, try making your purchases on the credit card while holding on to your cash. Remember using cash advance options that credit cards provide are typically very expensive. Also, pay at least the minimum when the credit card bill arrives.

If you have built-up equity and can afford an additional monthly payment, a home-equity line of credit may be just what may help you get through your financial emergency. Remember there is interest associated with borrowing against your home. Check with your bank about the about the specifics of interest and repayments if you draw on the line of credit. If you over-borrow than what your house is worth or the prices of your house go down, you’ll have to come up with the difference (between the sale price and the balance of your loan) when you sell the house. You could loose your home if you are not able to pay on your obligations. So understand the risks associated with borrowing money on your credit.

Seek help from relatives or friends

borrowing from your friends or relatives is not likely to require a credit-score or good credit to qualify. Plus you may get flexible terms with borrowing from your loved ones.

But this requires relatives or friends who are willing to offer help for your hardship. If you have fortunate and supportive relatives or friend, consider asking them for help. In consideration to borrowing from a relative or friend, here are some useful tips:

  • consider the significance of the relationship or friendship before borrowing. A relationship or friendship can be ruined if you are unable to repay like you promised.
  • be realistic about your efforts in paying back the loan. Avoid, for instance, promising more than you will be able to afford.
  • put your terms of the loan in writing. Know and have in writing in advance, for example, how much you will be paying and when, define what arrangements are to be made in case of your failure to pay, etc.
  • offer to pay interest on the borrowed money. This will avoid your relatives or friends feeling they are being taken advantage of. In essence, treat the borrowed money as a bank loan.

Seek professional help

If possible, seek professional help. A professional can help you better in how to fund your emergency expense. However, don’t set yourself for letting the professional take advantage of your financial situation.

Posted on 3/10/2007
by Raj Singh