are you ready for your financial emergency?Updated: Oct. 9, 2018

While we never hope to experience emergencies, life can surprise us and leave us in a less-than-ideal situation, sometimes requiring us to spend money on unplanned expenses. This is why it can literally pay off to financially prepare for emergencies by creating an emergency fund. But what can you do if you don’t have an emergency fund? It’s a legitimate question that many Americans might be asking themselves for many reasons. From funds being depleted after back-to-back emergencies to the simple inability to save, plenty of people simply don’t have extra cash lying around to cover every unexpected expense. Regardless of the reason, having some sort of financial plan in place will help you deal with a number of emergencies. Continue reading as we discuss what your options might be if you find yourself in a financial emergency and whether or not you should take on debt.

Before taking on debt …

Borrowing from a lender to cover debt is obviously less than ideal for most people, and as such, you’ll want to consider your other options before you take on any debt. Before even asking yourself the question of whether or not you should borrow, consider the doing following:

Take a good look at existing savings expenses (and cut back if necessary)

Ideally, you should have a budget that allows you to manage your daily, weekly or monthly spending. If you don’t, you should conduct a financial check and start budgeting today. Once you have a grasp on your spending, you should be able to see if there are recurring expenses you can cut down on to save more money in the following months. While future savings won’t help you immediately, they will guarantee you’ll have an easier time financing any money you may have to borrow. Similarly, if you’re able to make a payment plan with whomever you owe money, be it a company, doctor’s office, the IRS, etc., your budgeting and savings will help you determine how much you can pay.

Restructure existing debts

Aside from just cutting out expenses, you have another, longer term option available – you can negotiate the terms of any existing debt obligations. For certain types of loans, like mortgages and car loans, this can be done in the form of refinancing, which could potentially secure you a lower interest payment over time. Refinancing will, generally speaking, restructure your loan so that your monthly payments are lower, the life of your loan is shortened or you’re given some other benefit.

If you have another type of loan, like a student loan or credit card debt, you can also try to talk to your creditor to see if there’s a way you can renegotiate the terms of your loan. If you have an especially good standing with your lenders, you might be able to lower your monthly payments temporarily, restructure your payments to either skip or defer certain monthly payments or settle the balance. Negotiation isn’t easy or guaranteed to work, but it’s still an option that could be available to you.

While these options won’t give you money, they can give you the ability to save money that can be used to deal with your emergency.

If borrowing is your only option …

If you’ve looked at your budget, maximized your savings and still lack the ability to deal with your emergency, then borrowing is something you’ll probably have to do. While you may be tempted to sign onto anything that can help you fund the emergency, you don’t want to borrow without a plan. As such, you should avoid instant or emergency credit with high interest rates and look for better forms of borrowing that will allow you to borrow on better terms.

Consider low APR credit cards

Credit cards, if used responsibly, can provide a viable source of emergency funds if you really need one. While you may already have a credit card, you will likely have to pay interest if you opt to use it for the emergency and carry a balance for some time. That’s where 0% intro APR credit cards come in, as there are a number of cards offering long 0% intro APR periods on purchases. This allows you to borrow without the fear of dealing with growing interest rates; so long as you have a means of paying off the balance before the 0% intro APR period runs out, you’ll be in a good position. On top of that, using the card responsibly by making timely payments, can have a positive impact on your credit scores — it’s a win-win! With so many of these 0% APR cards to choose from, your options for how to deal with your emergency are pretty extensive. To help you decide which cards are worthwhile, we’ve detailed three of the top options.

Best no-frills 0% APR card: BankAmericard credit card

financial emergencyThe BankAmericard credit card is among our top-rated credit cards for a reason, as it offers an 18-month 0% intro APR on purchases and on any balance transfers made in the first 60 days (with a $10 or 3% balance transfer fee, whichever is greater). While the BankAmericard credit card doesn’t have the same cash back benefits or rewards as other major credit cards, the 18 months of no interest are pretty impressive and it charges no annual fee. Finally, cardholders can benefit from monthly FICO scores for free.

Best combination of 0% intro APR and cash back: Chase Freedom Unlimited

financial emergencyWho says you can’t have it all? With a 0% intro APR for 15 months on purchase and balance transfers (with a $5 or 3% balance transfer fee, whichever is greater) and 1.5% cash back on all purchases, there’s a lot to love about Chase Freedom Unlimited. In addition to earning you cash back on your financial emergency, Chase Freedom Unlimited cardholders will earn a $150 bonus after they spend $500 within the first 3 months of account opening — this means you can redeem this cash as a statement credit to pay down your balance! Cardholders also pay no annual fee.

Best for those with less-than-perfect credit: Discover it Cash Back

financial emergencyThose with a credit rating of average or better (usually considered a credit score of 670 or higher) will want to consider Discover it Cash Back. That’s because cardholders can enjoy a 14-month 0% intro APR on purchases and balance transfers (with a 3% balance transfer fee) — after the 0% intro APR expires, a variable go-to rate applies — and earn cash back rewards. Discover it Cash Back earns 5% cash back in rotating categories each quarter you enroll (up to the quarterly maximum, currently $1,500, then it’s 1% back) and 1% cash back on all other purchases. New cardholders can also get dollar-for-dollar match of all the cash back they’ve earned at the end of their first year — this means if you earn $500 cash back in your first year, Discover will match that and give you a total of $1,000 back! Finally, cardholders will pay no annual fee and get copies of their TransUnion FICO credit score monthly, which is a great start to credit monitoring.

Negotiate with friends or family

Admittedly, this is typically viewed as a last resort, but it may be worth considering. While borrowing from people you know is often seen as a less formal option, it may be a viable one. If you take your friends and family seriously and demonstrate that you’re likely to pay them back — and know that you need to pay them back — the better your chances of borrowing from them without ruining your relationship. For added measure, you can offer to draft up designated terms for borrowing from them, detailing when your payments will be made, if there will be any interest, etc.

Everyone can find themselves in a circumstance when they have to fund some emergency, but if you handle the financial emergency well, you can not only be financially covered, but also perhaps boost your credit scores during the process. While it can be a difficult topic, personal finance is something we all need to learn. Keep reading our personal finance blog for more tips on making smart money decisions.

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