5 Best Ways to Borrow Money in a Financial Emergency

As COVID-19 continues to affect millions of people around the country, many Americans are facing financial emergencies. Whether you’ve been laid off and are struggling to pay rent, surprised by unexpected bills or now responsible for caring for children and loved ones, a financial emergency can make an already stressful situation that much worse.

Luckily, there are a variety of options available when it comes to borrowing money to keep you afloat during an emergency. When it comes to borrowing money, it’s important to remember that some borrowing options better than others. You should always prioritize getting the lowest possible interest rate and payday loans should be avoided at all costs.

Try your personal network first

If you have friends or family who can loan you money, odds are they won’t charge you interest (and if they do, their rates will probably be lower than a bank). Friends or family may also be able to gift you money to help you weather tough times. Although it can be uncomfortable to ask others for help, it’s important to remember that most people have experienced a financial emergency before. While not everyone is in a position to give, it doesn’t hurt to ask.

Take out a personal loan

Personal loans are another popular way to access fast cash during a financial emergency. Personal loans are available from brick and mortar banks, credit unions and a variety of online lenders. In many cases, you can apply online in just a few minutes and can have cash deposited into your account within a few business days. In general, borrowers with stable incomes and good credit history have a better chance of securing favorable rates. While loan amounts can range from $1,000 to $100,000, you should only borrow as much money as you need, since you’ll have to pay it all back plus interest.

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Consider a credit card

Credit cards can be used to fund emergency expenses in a pinch. Many Americans already have access to credit cards, making them an accessible and convenient option during a financial emergency. How much you’re able to put on your card will depend on your credit limit and existing balance. In general, credit cards have much higher interest rates than personal loans, so they’re a less affordable option for most borrowers.

Putting major expenses on a credit card can also make it harder for borrowers to get out of debt. However, if you’re in the midst of a financial emergency, credit cards can be a good solution in a pinch. Make sure to pay off the balance on your credit card as soon as possible to avoid paying additional interest.


Apply for a home equity line of credit (HELOC)

Applying for a home equity line of credit (HELOC) is another option when it comes to weathering financial emergencies. If you own a home and pay a mortgage, you build up equity over time as you pay down the mortgage balance. Once you’ve built up enough equity, you may be able to borrow funds against that equity by taking out a home equity line of credit. HELOCs often have lower interest rates than credit cards or personal loans, making them an attractive option for borrowers looking to save money.

However, HELOC rates may fluctuate over time according to the market. It takes time to build up a substantial amount of equity, so not all homeowners may be eligible. Applying for a home equity line of credit also means using your home as collateral. If you become unable to make payments in the future, you risk losing your home. Because of this, you should carefully consider all of your options before deciding to apply.

Payday Alternative Loans from credit unions

Many credit unions offer lower-interest alternatives to predatory payday loans. The loans, known as payday alternative loans (PALs) are regulated by the National Credit Union Administration. Credit unions, which are not-for-profit, are often able to offer cheaper, more consumer-friendly loans.

Interest rates are capped at 28% APR and fees are minimal. Depending on the loan, you may be eligible to borrow an amount anywhere from $200 to $2,000. Borrowers with poor credit may still be eligible for a payday alternative loan. If you’re hit with a financial emergency and need a little extra help, PALs are a much better solution that a typical payday loan, which usually charges predatory interest rates and makes it difficult to escape a long-term cycle of debt.

Take advantage of government programs

Government programs like unemployment benefits, food stamps and Medicaid may not be the quickest option during an emergency, but they can help you to stay afloat in the long term if you’ve been hard hit by a crisis. During the coronavirus pandemic, the federal government has expanded unemployment benefits to cover a wider variety of workers who may have lost their income due to the virus. Employees who are temporarily laid off because of the crisis may qualify for unemployment benefits without having to look for another job. A government stimulus check is also on its way to help people further bolster their savings and increase government aid cashflow during these hard economic times.

Coronavirus (COVID-19) Financial Wellness Resources

Where to Find Financial Relief During Coronavirus (COVID-19)
Coronavirus Stimulus Package: Everything You Need to Know
How to get your stimulus check as soon as possible
How to cash quickly during the Pandemic?

The bottom line

Margaret Wack

Contributing Writer

Margaret Wack writes about personal finance, health, wellness, arts and culture, among other topics.