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Strategies for Paying Emergency Expenses

Audio version available here:

Length: approx. 1 min. 35 sec.

Though emergencies are inevitable, many Americans feel insecure in their ability to pay off sudden expenses. In fact, only 44% of Americans say they would be able to pay off a $1000 expense in the event of an emergency. The solution many would seek out lies in credit cards and loans, or simply not paying the expense at all, but there are a few low-cost ways to finance an emergency.

If you do not expect to have the funds to pay off your emergency expense for several months, putting it on a regular credit card averaging a 20.75% interest rate is not the best choice. Instead, 0% credit cards will give you some time to come up with the funds without accruing interest. While convenient, keep in mind that the 0% interest rate is not permanent, and most cards will begin charging interest after a certain number of months.

Meanwhile, a non-traditional method to borrow money in the case of an emergency is SoLo, a peer-to-peer loan app. The interest-free loans this platform hosts are maxed out at $575 and must be paid in full within 35 days. The catch is that getting approved for a peer loan is decided entirely by individuals offering their money, and if you become delinquent on paying the loan back, you will have to cough up a collections transaction fee in addition to a late fee.

Of course, there is also the choice to ask for financial help among your family and friends. The risk here is your relationship with them.

While there are many opportunities for low-cost solutions to an emergency expense, the most secure method to not ending up with debt is to have sufficient savings built up for this exact purpose. Understandably, with the cost of living being so high currently, it can be difficult to get an emergency fund started. You should start small; saving even just $100 a month will earn you a $1200 cushion by the end of the year.

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close up of man pulling $100 bills out of his wallet


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