You’ve made your car payment, paid your rent, and put money toward other bills. You don’t have much money left over, but you’ll at least make it to next month.
Then, it happens. Your car transmission fails, your kid breaks their leg, or your house floods. No matter the situation, you find yourself needing money now.
But who’s going to give you money if you have bad credit? You may think you have zero options, but that’s rarely true. From short-term personal loans to liquidating assets, you have a few different ways you can cover your unexpected expenses when you have bad credit.
Sell Some Stuff
The fastest way to scrape together some cash is to either sell or pawn some stuff that you can live without. This could include collectibles you have stashed away. It might also include your TV, computer, or any gaming consoles you own. In truly desperate times, you might consider selling your car. This can be helpful if your car is what’s causing your financial problems — and if you live in an area with good public transportation.
Pawnshops can be a good option if you know you’re going to be able to get out of your financial situation soon. You simply “sell” your stuff on a short-term basis, then buy it back later. And if you decide not to buy it back (or you can’t afford to), you can still keep the money you got for it. Pawnshops are the very last resort for many, as you almost never get the full amount an item is worth.
Family and Friends
If you’re truly in a bind, your family and friends may be able to help. Of course, it’s important to make sure you can pay them back, even with interest. Otherwise, your relationship can be tainted forever. That’s why a lot of people refuse to lend to or borrow from friends and family.
An alternative to this approach is crowdfunding. There are sites like GoFundMe that allow you to make your case for getting help from the internet community. However, if you take this route, you should know that most crowdfunding campaigns get little to no money at all. But it can still be worthwhile to take a couple of minutes and create an online campaign.
Slash Your Normal Budget
What are you currently paying for that you can do without, at least for a while? Maybe you don’t need your streaming services this month, or you could stop eating out.
There are a lot of tools out there that will help you evaluate and discover what subscriptions you’re paying for so you can decide what you do and don’t need. These tools can also help you create and stick to a budget in the long term.
Tap Into Your Retirement, Assets, and Insurance
Many people with bad credit are still planning for the future. They may own a home, have retirement funds, and/or have life insurance policies. In the event of an emergency, any or all of these resources can be used for quick funds. However, doing so should be one of your last resorts. Tapping these resources can damage your long-term security.
If you take money through your home equity, you essentially open a line of credit with your house as collateral. This may not be an option for those with bad credit. Anyone with life insurance may be able to tap the cash value of that policy. But if you default on it, your policy could lapse, leaving you with a major bill. When it comes to your retirement plans, you can tap into your 401(k) or Roth IRA if you meet certain conditions. However, there may be penalties.
Consider Declaring Bankruptcy
If your unexpected expenses have to do with medical debt or other major bills, bankruptcy might be an option. In fact, many people consider this option first, since it promises to erase your debt. Yet that’s not really how it works. Filing for bankruptcy can impact your life for years to come.
When you file for bankruptcy (usually Chapter 7), you will be required to sell many of your assets to cover your outstanding debts. After that, any leftover debts will be discharged. You may be left with very little assets, but you’ll have a clean slate. Note that bankruptcy is a black mark that will stay on your credit for at least 7 years. Also, certain debts like tax debt and school loans won’t be discharged.
We want to make this very clear: You should NEVER file for bankruptcy unless you have considered every other option available to you. You should also speak with a financial counselor and/or a lawyer before filing.
Apply for a Short-Term Personal Loan
Even for those with bad credit, short-term personal loans may be a viable option to cover unexpected expenses. With a short-term personal loan, you can get the money you need quickly, and pay it back on your schedule. However, you should know that the longer you take to pay back the loan, the more you’ll pay in interest.
In addition, the worse your credit, the higher your interest will be. You may also be required to pay fees to get your loan. As such, it’s important to research all of your options when it comes to loans to find the best one for you.
At Your Own Funding, we can connect you to a variety of lenders and help you figure out how much a short-term personal loan will cost you. Fill out our easy application to see how much you can get today!