3 Resources if You Need a Loan

by Guest on January 18, 2012

I remember hearing a statistic in on the podcast ‘Freakonomics’ that said over half of Americans would have trouble coming up with $2,000 if they needed it in 30 days.  That’s a lot of people who don’t have sufficient savings.  Most financial experts would tell you to have an emergency fund of three to six months of expenses, which can be anywhere from four to ten thousand dollars for most Americans.  It’s sad to think that so many people would have trouble coming up with $2,000.

That’s one of the reasons why so many people turn to credit cards as their method of paying for emergencies.  They think it’s the only option, when that couldn’t be further from the truth.  The credit card trap is a losing battle and should be avoided at all costs.

So what are some ways to access money if you are in an emergency and don’t have enough savings?  Here are three suggestions that you can think through.

Please realize that these are considered ‘last resort options.’  It’s highly encouraged that you don’t use these sources, but for those who don’t have an emergency fund and hate the idea of using a credit card, these may be some of your only options (short of selling things around the house first…which may actually be better than some of these options!).

Borrow from Family

You’ve heard it said that you should never borrow from friends or family, and this is true for most cases.  A quick loan to cover a real emergency might be an exception, but approach it with caution as it can cause friction between you and a family member.

Borrow from Retirement

If you have a 401(k) or 403(b), your employer might give you the option to borrow from it.  This is a little better than borrowing from family, but still nowhere near as close to having an emergency fund.  Whatever you do, make sure you keep up with the payments so that you don’t default on the loan.  If you do, the money will be taxable and you’ll be paying a 10% penalty when you file your 2012 taxes.

Use Peer to Peer Lending or Online Loan Options

A lot of people have found peer to peer lending and online loan options to be helpful lending options.  Sites like www.prosper.com/loans/, http://www.lendingclub.com, and www.comparethemarket.com/loans can be explored to see if an online loan option is right for you.

At the end of the day, it’s still better to have an emergency fund, so be sure to build your up as soon as possible.

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