5 ways to pay for an emergency expense without using a credit card


  • 54% of Americans live paycheck to paycheck, unprepared for emergency spending.
  • Instead of using credit cards, you can put retirement savings on hold or sell investments in an emergency.
  • You can also apply for a business hardship loan from your 401 (k) or apply for a low interest personal loan.
  • Read more stories from Personal Finance Insider.

If you don’t have emergency funds, you are not alone. Earlier this year, a survey by PYMNTS and LendingClub found that 54% of Americans live paycheck to paycheck. This means that 54% of Americans are unprepared for an emergency expense, like a car repair, home repair, or medical emergency.

Some people use credit cards to cover emergency expenses, even using their points wisely to pay for emergency trips. But credit card debt is expensive and can snowball over time. It may therefore be beneficial to find another way to pay for an emergency expense.

We spoke with financial planner Sabrina M. LaFleur, who shared five ways to pay for an unexpected expense without using a credit card.

1. Sell part of your investments, such as stocks, cryptocurrencies or mutual funds

It would be ideal to sell your investments when they are profitable, but this is not always possible if you are facing an emergency expense. In a pinch, you may have to sell your stocks or crypto at a loss to cover an unforeseen expense. LaFleur recommends speaking to a financial advisor who can help you understand the tax implications of your transactions down the line.

2. Choose another concert

This may not be doable for immediate emergencies, says LaFleur, “but it should be considered if you don’t have at least $ 1,000 in savings for emergencies.” Emergency spending will always happen, and putting money aside now means you won’t have to go into debt later.

Instacart, DoorDash, and other delivery services are good options for quick cash. You can also find paid concerts on a community Facebook page or on Craigslist. Audio recording concerts are available on sites like ACX and offer high hourly rates for recording audio books. If you have furniture or appliances that you can sell online, take them to apps like OfferUp to make a quick buck.

3. Suspend contributions to your retirement accounts, if you have any.

You can suspend contributions to your retirement accounts to free up extra money with each pay period, says LaFleur, although that depends on how much you contribute. “It will slow down your retirement goals,” she adds, “but securing your financial base is a top priority before saving for retirement.”

Plus, if you’ve had a Roth IRA for at least five years, you can withdraw the capital you’ve contributed without penalty. It’s better to secure your financial well-being now than to contribute to retirement accounts that will penalize you for withdrawals before age 59 and a half, she says.

4. If you are eligible, apply for an operating hardship loan from your 401 (k)

Even though applying for a hardship loan on your 401 (k) is a longer process, LaFleur says, “It is worth considering whether you are at risk of losing your home due to foreclosure, loss of income or loss of income. due to permanent disability or major medical problem. expenses. ”Talk to your human resources department to see if this option is right for you.

5. Go for a low interest personal loan instead of using credit cards

“Personal loans come with a fixed interest rate, a fixed repayment period and, ultimately, a fixed monthly payment, which makes [them] easier to budget, ”explains LaFleur. On the flip side, credit cards only require you to make a minimum payment, usually little more than interest, resulting in a longer repayment period and growing debt.

“Interest rates are often higher [on credit cards], too, “she says,” so that the principal balance can really slip away if you don’t plan on paying more than the minimum each month. “

Personal loans can be secured with collateral, such as a certificate of deposit (CD), a special savings account that you can open at most banks, and

credit unions

. Lenders may also require proof of income to show that you can repay the loan easily. But, warns LaFleur, “You might have a hard time getting approved if you’re in a rush. If you’re already struggling to pay your bills, you might have a hard time proving you can afford a new loan. . “

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