It is never pleasant to be caught short of cash – it can happen for all sorts of reasons. An unexpected expense which is unavoidable is stressful even when you have back up savings. Couple an emergency expense with a bank account balance which you are trying to keep in the red until pay day brings with it extra stress. Here are some ways you can finance an emergency purchase if you are caught short:
Ask friends and family: This could be the easiest and but also possibly the hardest way of borrowing money. It is easy because there are (usually!) no special terms, usually no interest and it is all done informally. However, you may feel like you are imposing yourself on your closest friends and family and taking advantage of their kindness. You also might have mixed emotions about asking them – perhaps you don’t want to ask in case they feel awkward about it. The informal nature of the loan can cause difficulties with your relationships if you can’t repay when promised.
Use your credit card: If you already have a credit card you can use this to make purchases. You can also use a credit card to get cash from an ATM or over the counter (known as a cash advance). You will be better off if you can use the card for your purchase rather than withdraw cash. Interest rates charged by the credit card issuer are usually higher for cash advances and there may also be fees.
Get a short term loan: People who are employed who need cash to see them through until their next pay day might consider a pay day loan. These types of loan can be difficult to understand. A good website to start understanding pay day loans is www.Wonga.co.za. This website is clear, understandable and the terms transparent which is refreshing. Basically a pay day loan is a short term loan which usually lasts about 30 days. The application process is quick and easy. On the downside interest rates are generally higher than credit cards. On the upside the terms of lending are set out very clearly by some lenders so you know exactly what you will be charged for the borrowing.
Overdraft: If you have an agreed overdraft facility with your bank this will probably be your first thought when you need money in an emergency. While using an existing agreed overdraft can be sensible as it requires no application, is quick and the interest rates charged will usually be low (check first!) be wary of going overdrawn without authority from the bank. The charges and interest charged for unauthorised overdrawn amounts can be astronomical.
Help from a charity or social fund: Depending on your circumstances and the availability of help in your community you may be able to get financial help from a charity or social fund. Many of these funds however take time to process a request. They are worth bearing in mind though. If they can’t help you out with cash for your emergency perhaps they can help you with some other essential living cost (such as food) – that way you could use the money you would have spent on food to fund your emergency.
Whenever you borrow money you should think about the consequences and your ability to repay the loan as and when it is due. Some borrowing methods are easier than others and some are more expensive than others – you need to borrow from a source which is right for you.