Everyone goes through times when money is tight and, in the wake of coronavirus, it seems like those times are hitting people harder than ever. As of late May, nearly 40 million Americans had filed for unemployment assistance in the last 10 weeks. To say that many are short on funds is an understatement.
If you are missing a paycheck and still have bills to pay, here’s what you can do to help yourself stay afloat. Read on below to learn more about where you can turn to when you need cash fast.
Turn to your savings account
If you’re lucky enough to have savings, that’s the first place you look in tough financial times. While most experts recommend having between three to six months worth of expenses saved up, even just having $1,000 on hand to cover an unexpected bill or another emergency can go a long way toward providing peace of mind.
In the event that you haven’t started building your emergency fund yet, it’s okay. There are other ways to find extra money. That said, a good idea to start putting money aside for this purpose once you get back on your feet.
Take out a personal loan
If you’re uncomfortable with the idea of putting too much on a credit card, you may want to look into taking out a personal loan. Since personal loans are unsecured, meaning they’re not tied to an asset like your home or a car, the approval process relies heavily on your income and credit score. The higher they are, the better the interest rate you’ll receive.
Like any loan, the first step to getting a personal loan involves shopping around to find the best rate. To see what kind of rates you qualify for with your credit history, enter your desired loan amount into Credible's online marketplace and compare offers from lenders almost instantly.
Then, once you’ve decided on a lender, you’ll need to fill out an application and provide the lender with any requested documentation in order to find out whether you’ve been approved.
Pay your bills with a credit card
When you need cash fast, turning to credit cards can feel like a convenient option, especially since most of us already have at least one in our wallets. That said, you need to be careful not to rack up too much debt, especially if you aren’t sure when your next paycheck will be coming in. Interest rates on credit cards are fairly high and interest payments can add up fast.
Ideally, when you use a credit card, you’ll be careful with your spending and make sure to pay off your balance in full each month. However, if that’s not possible, your best bet may be to look into getting a 0% APR card, which will allow you to make purchases without accruing any interest for a set period of time.
Ask for assistance with your bills
Another step you should take when you’re having trouble making ends meet is to call your lenders and ask what type of hardship assistance they offer. Particularly during coronavirus, many financial institutions are open to offering payment deferment options or temporarily lowering interest rates.
Right now, you can almost certainly get help with your mortgage payments and credit card bills. However, you should check with your utility companies, as well, since most major providers have energy bill assistance programs.
While you will have to make up for any deferred payments eventually, temporarily pausing those payments will help you free up cash that can be put towards your more immediate needs.
Borrow from your retirement fund
Lastly, if you have a retirement fund like a 401(k), you may be able to take a loan from that asset. That said, there are a lot of restrictions on doing so. For example, you can only borrow 50 percent of your account balance, up to $50,000, regardless of how much you have in the fund. Additionally, you’ll have to pay back whatever you borrow within five years, plus interest.
If your plan allows for one, you may also be able to do a hardship withdrawal, but they are only allowed under certain circumstances. In that case, any money that you take out of your fund will be taxed as regular income and you may also have to pay an early withdrawal penalty on it.