According to the results from August 2011 of the National Foundation for Credit Counseling’s online poll, 64% of respondents would not be able to tap an emergency fund of only $1,000 if they were confronted with an unexpected bill.
Many people experience financial emergencies at one time or another during their lifetimes. If we assume that you are among the 64% of people who do not have a fund set aside for an emergency, then consider proceeding in one of the following ways.
Approach a family member for a loan
This solution might not appeal to your pride, but it should be your first step before taking out a loan at a bank. Unlike a bank, most family members are not looking for an opportunity to gouge you with excessive fees and high interest rates. They would probably be satisfied if you just repay the money they lend you.
If your pride is still protesting, consider offering to pay your family member interest. You could offer him a higher rate than he would receive from the bank for his money, and still be paying a much lower interest rate than the bank would charge you. Subtract the bank’s current loan rate from the current savings rate or even the interest rate on a one or two year certificate of deposit. Use this difference to pay your family member more than he would get from the bank, while still paying less than you would have pay them. This way you both win, and the bank loses. But most importantly, you have not fallen into the bank’s credit clutches.
Get a part-time job
There is always something you could do for extra money. Although the long-term prospect of working at a fast food restaurant or bagging groceries could be enough to send you running to the bank for a loan at any interest rate, the truth is that most people do have the fortitude to accept less than ideal conditions if they know that the conditions will not last forever. So do a little extra work on the side for as long as necessary. As a matter of fact, do it for a little longer than necessary and build some insurance against this happening to you again.
Clean out your garage, basement and closets
Look for possessions such as athletic equipment, furniture, tools, musical instruments, toys or clothes that you could sell. If there are things stored throughout your house that you have forgotten about then you could easily part with them. If the idea of a garage sale doesn’t appeal to you, then take your things to a local secondhand store where they will be sold for you. According to the national media buying used is becoming increasingly more acceptable as more and more people embrace the notion of buying from secondhand stores.
While it is best to prepare beforehand there are ways to mitigate the adverse consequences if you find yourself, like millions of Americans, in the midst of a financial emergency. The key is to approach the problem creatively and not automatically seek out the nearest bank or loan company.