It happens to everyone, and now it's your turn. You need help paying bills. Your car's engine blew up, your dog broke his leg chasing the neighbor's cat or you need major dental work. When savings and health insurance don't cover unplanned expenses, there are several ways to get the cash you need.
Solutions for Temporary Relief
If your credit is in good shape, you may qualify to borrow a personal loan. This type of loan does not require collateral; you won't have to put up your car title or home to borrow a personal loan. A personal loan is made for a specific amount and typically carries a fixed interest rate. You'll repay your loan in monthly installments according to a payment schedule shown in your loan documents.
Personal line of credit
A personal line of credit offers an option for emergency cash that you can use as needed. For example, if your bank approves a personal credit line of $2,000 and you only use $500, you'll pay interest only on the $500 you used. Personal lines of credit generally have variable interest rates and payment amounts can also vary according to interest rate changes and the amount you borrow. A personal line of credit can help when you have recurring expenses such as a series of medical treatments or educational expenses.
Robbing Peter to pay Paul isn't a great idea on an ongoing basis, but it's possible to resolve one-time bill-paying issues by using a credit card to pay expenses. If bills can't be paid with a credit card, it may be possible to use a credit card cash advance; you can deposit cash into your bank account or pay bills directly with cash. Please note that credit card cash advances may carry a higher interest rate than credit card purchases. You may be charged a balance transfer fee. Read the fine print on your credit card agreement before taking out a cash advance; call your card issuer to verify costs if you can't find them on your billing statement or cardholder agreement.
Options for Homeowners
If you need help paying bills and own a home, you may have additional options for raising emergency cash. You'll need to have enough equity in your home to qualify for financing that uses your home as collateral. By whatever name, loans secured by your home can be foreclosed if you don't make payments. The Federal Trade Commission cautions homeowners to carefully consider potential risks when borrowing against home equity.
If you have enough equity in your home, you may qualify for a cash-out refinance. This means you can borrow enough to pay off your current mortgage and take out a new mortgage with additional cash to pay off your bills. Refinancing allows you to pay off your existing mortgage and take out a new mortgage. You can expect to pay closing costs, which you'll want to consider when comparing borrowing options and refinancing quotes.
Home equity loan
This option typically carries lower costs than refinancing and can be approved faster as home equity loans don't require formal escrow and closing. Home equity loans are also called second or junior mortgages; they're similar to a primary mortgage in that your home serves as collateral for a home equity loan.
Home equity line of credit
Also known as a HELOC, this option provides a line of credit that can be drawn against when needed. As with a personal line of credit, you pay interest on amounts withdrawn, but the difference is your home serves as collateral for a HELOC. A home equity line of credit can be useful for a series of payments such as medical bills, education costs or home remodeling and repairs done over a long period.
Whichever option you choose for paying bills, it's important to consider pros and cons and to evaluate multiple quotes for the options you're considering. Free online loan quotes can help with comparing loan terms and costs before selecting an option that works best for you.