If you ever received a surprise medical bill in the mail, you probably already have a strategy for paying unexpected expenses. But if you don’t, now is the time to get busy making the right financial preparations to deal with the unpleasant event. Unfortunately, the default technique is to burn through savings and retirement accounts. But there are more downsides than advantages to those tactics. A much wiser remedy is to take out a personal loan when there’s an immediate, unplanned need for funds.

But savvy consumers, homeowners, and young professionals have many other ways to handle financial surprises. Besides crowdfunding and home equity loans, they get second jobs to cover out of the blue bills. For smaller emergencies, credit cards can get the job done but at a high rate of interest. Finally, creative consumers can always put their negotiating skills to work to reduce or eliminate balances due. Review the pertinent details about the top ways people resolve financial emergencies of all kinds.

Savings & Retirement Funds

For generations, working adults have turned to retirement and savings accounts to cover emergencies. Using an IRA is a last-ditch method because of the heavy penalty for early withdrawal, which is 10% in most cases, and that’s in addition to the tax liability on the withdrawn amount. For savings accounts, there’s no real penalty except the smaller balance after emergency expenses are paid. Think twice before using available cash in existing accounts. Not only are there potential tax ramifications, but there are also early distribution penalties and long-term effects of having less savings. Plus, other options exist. Check all the potential sources of funds before yanking cash from a long-term savings or retirement nest egg.

Personal Loans

When the mailbox contains unwanted news like a past due medical charge from a hospital or a claim denied notice from a healthcare insurer, consumers often wonder should I get a personal loan to cover the shortfall? When savings accounts and other reserves just aren’t available, applying for a loan can make good sense and resolve the problem in short order. The goal is to avoid putting vital assets, like a home, at risk of loss. Fortunately, most personal loans require no collateral, so applicants don’t have to lose sleep over their financial security. It’s essential to review a comprehensive guide that runs through all the options, pros, and cons regarding personal loans.

Crowdfunding

Crowdfunding platforms have been around for more than a decade but are only coming into widespread use in the 2020s. If you face a large cash shortfall due to an authentic emergency like a major illness, a life-threatening accident, or the death of a spouse, consider taking to social media and promoting the cause. The most successful crowdfunding campaigns are those that users advertise on their social pages, through personal networks, and in church communities. People have raised massive sums this way, but it takes time to reach goals. Plus, consider getting expert assistance if you’ve never conducted a campaign before. Getting the word out is essential, so it helps to know about online promotion and viral marketing to make the arrangement work.

Home Equity Loans

Unexpected bills rarely call for outsized solutions like home equity loans. But for those who face legal judgments, potential bankruptcy, and other high-octane money emergencies, it can make sense to leverage built-up equity in a house. The most common reason many use equity lines to pay for renovations or purchase a rental property, not to cover surprise expenses. However, most homeowners are reluctant to put their biggest investments at risk by borrowing against them. When considering an equity line, do your homework and investigate every other possible way to raise needed funds. If the amount is large and pressing enough to warrant putting your home on the line, then a equity line could be the right way to go. But it should only be used as a last-ditch solution.

Credit Cards

Credit cards are one of the costliest ways to deal with an out of left field expense. Interest rates on plastic are among the highest of all forms of debt, which makes them a poor choice for dire purposes. Most consumers who consider using plastic in a pinch have access to other financial resources that serve the purpose much better. However, for small healthcare charges and similar items, a card can be a suitable solution, provided you can pay the balance down when the next billing statement arrives. If you go this route you should also inquire about lowering your credit card interest rates so that you are not spending double, triple, or more on the cost of the original emergency due to added interest. 

Second Jobs

In a way, taking a second job is the ideal way to meet a money-related challenge. The downside is that it can take a few weeks to see a first paycheck, and the amount might not be enough to suffice. But if time is not a major factor, getting a part-time job can serve as a short-term solution if you have enough free time to work the extra hours. Consider asking for overtime at your current job instead of finding a new one.