3 Ways to Pay For Unexpected Expenses
At some point, most of us are likely to encounter an unexpected event in our lives—loss of job, unplanned illness, or a flooded basement—all of which will likely require you to shell out cash you weren't planning to spend.
Unfortunately that unexpected expense could be crippling for many Americans; one study found that over 1 in 5 Americans have no emergency savings. If this is you, you are not alone!
So when the unexpected strikes, what are some options to help pay for it?
1. Credit cards
In general, if you can't pay off an accrued balance at the end of the month, then credit cards probably shouldn't be used to finance large, planned expenses—like purchasing a car or a remodel. This is because the interest rate on credit cards is generally much higher than a loan or line of credit from a bank. However, if you need money in a pinch, then a credit card can be a good option. The approval process is generally faster than a traditional loan and you'll have nearly 24/7 access to the borrowed funds. Just make sure you take a hard look at interest rates and fees before putting a significant balance on it. Before opening a new card, look around and make sure to compare interest rates and perks—a great place to start is by checking out a WaFd Bank credit card.
2. Leveraging your home's equity
If you're a homeowner and have some equity invested, then a home equity line of credit, or HELOC, could be a good option. A HELOC is essentially a line of credit using your existing home as collateral. These funds can be used on just about anything, and the interest you pay can be significantly less than credit cards.
3. Borrowing against a 401k
Certain situations allow 401k owners to borrow against their retirement savings, but—as with all these options—you'll want to proceed with caution. If you do borrow against your 401k, according to Forbes, you'll need to pay it back with pre-tax dollars and you'll be losing out on earning interest while the funds are lent to you. Forbes has an article that provides some more information about this type of financing.
WaFd Bank is Here to Help
When it comes to getting your finances in order for the ups and downs of life, a little planning goes a long way. Whether you're a seasoned budgeting pro or new to saving (check out WaFd Bank's account options while you're here), your local WaFd Bank branch is available to help you reach your financial goals. Open an account online, visit your local branch, or give us a call at 800-324-9375 to learn more and open an account today.
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