10 Ways to Get Cash in a Crunch

October 11, 2012

We recently received a question about how to get money “within minutes.” While we certainly can’t promise any way of getting a significant amount of cash that quickly (at least legally), there may be times when we need money for an emergency but don’t yet have sufficient savings. Here are some pros and cons of ways to get cash…(Generally, the quicker you can get the money, the more it will cost you.)

Within a day

Home Equity Line of Credit (HELOC)

Pros: The is one exception to the rule since you can get a loan against your home equity just by writing a check but the average interest rate is less than 5%. It can also be tax-deductible.

Cons: First, you need to have good credit and home equity, which can be hard to come by with today’s real estate values. Second, to have instant access to the line of credit, you need to set it up before you need it. Otherwise, it could take up to a month. Third, the interest rate is generally variable so it could rise. Finally, if you can’t make the payments, your home is on the line.

Credit Card Cash Advance

Pros: You can get cash really fast and pay it back over a long time period.

Cons: You need to have available credit on a credit card and you may have to pay upfront fees and an obscenely high interest rate.

Payday Loan

Pros: You can get cash really fast even with low or no credit.

Cons: You can generally only borrow $500-1000 for up to two weeks and you’ll have to pay an even more obscene interest rate.

Within a week

Retirement Plan Loan

Pros: There’s no credit check and the interest just goes back into your own account.

Cons: Not every plan provider allows loans and even if they do, you can generally only borrow up to the lesser of $50k or half of your vested account value. Once you take the loan, your money is no longer invested and if you leave your job, any outstanding balance after 60 days may be considered a withdrawal, which is taxable and may be subject to a 10% penalty if you’re under age 59 ½. There may also be additional fees.

Margin Loan

Pros: There’s no credit check and the interest rates are relatively low.

Cons: You need to have enough money invested in a brokerage firm to act as collateral and you may need to add to that collateral if the investments fall in value.

Personal Loan

Pros: The interest rate is typically lower than a credit card cash advance or payday loan.

Cons: You need decent credit and the rates are still relatively high.

Within a month

Home Equity Loan

Pros: Interest rates are generally fixed at an average rate of less than 6% and can be tax-deductible.

Cons: Like a HELOC, you need good credit and home equity and you’re putting your home on the line.

Cash Out Mortgage Refinancing

Pros: Mortgage rates are averaging less than 3 or 4% and are tax deductible. In addition to getting the cash, you can also lower the interest rates and payments on your current mortgage. The payments can then be spread out over 15 or 30 years.

Cons: Once again, you need good credit and home equity and you’re putting your home on the line. There will also likely be higher closing costs than the other home equity options. You can see how long it would take to recover any upfront costs with this calculator.

Varies

Loan from Family or Friends

Pros: You may be able to work out a more favorable interest rate or payment plan than you could with a commercial entity.

Cons: You could really jeopardize these relationships if you have trouble paying.

Sell something

Pros: You don’t have to worry about being in debt to anyone and you may be surprised by how much you can get on Ebay or Craig’s list for the junk that’s been taking up so much of your closet space.

Cons: You’ll have to give something up and deal with the hassle of advertising and shipping it.

Of course, the quickest and cheapest way to get cash is to have some savings in the bank, which is why it’s so important to build an emergency fund of at least 3-6 months worth of necessary expenses. This way you’ll be earning a little bit of interest instead of paying it to someone else. Just be sure to keep it somewhere safe and accessible like a bank or credit union account or money market fund.

Do you have any experiences to share with any of these? Can you think of other ways to get cash quick in a crunch? Share your thoughts in the comments section below.