Even when you plan your budget carefully, there may come a time when an unexpected bill, appliance breakdown or an expensive car repair can leave you unprepared and unable to find the money.
This can be further complicated if your poor credit history means you can’t secure credit from traditional sources such as a bank loan or a credit card. Ideally you will have a ‘rainy day fund’ for such unexpected expenses, and can borrow from yourself – but if not, here are a few options for emergency funds.
Friends and family
Before looking to lenders with high interest rates for emergency loans, is there a friend or relative who may be able to loan you the money? If you can borrow from a friend, partner, parent or sibling, you can avoid the high interest rates often charged for products such as payday loans and work out a favourable repayment plan.
Talk to your bank
speak with your bank to see if they can help you. You might be able to extend a credit card limit or overdraft.
What can you sell?
Rather than accruing more debt, it may be an option to sell items you already own to pay to cover unexpected costs. Auction and free listing sales websites are an easy way to advertise items you may not need, such as clothing, electronics, jewellery and more.
If you are unable to get a loan from your bank or other traditional lenders, guarantor loans for people with bad credit may be an option. If you have bad credit or no credit history, you may need help from someone to guarantee that the loan will be repaid. A guarantor could be someone who is willing to repay the loan if you miss any repayments. This could be a friend, family, spouse, partner or work colleague who must meet some lending criteria to be eligible.
Borrow against an asset
Another option is to secure a loan against your home or your car. But bear in mind that you put these assets at risk if you cannot make the loan repayments – if you were to lose your car due to defaulting a loan, would it prevent you from travelling to work and earning the money to pay off your debt?
Unexpected bills, costly repairs or the need to buy a new big-ticket item for your home doesn’t have to spell disaster – but you can avoid the need for emergency lending by building up an emergency fund. If you do need to take out an emergency fund, consider the repayments and interest carefully to prevent an unexpected cost becoming a financial disaster.
Remember, whether you are looking for more information about debt or need free debt advice there are some debt charities in the UK such as StepChange Debt Charity that can be contacted through their free telephone helpline or online.