Alternatives to Emergency Savings

Credit Cards

Credit Cards are revolving lines of credit in that they are meant to be utilized only in the very short term. There’s a reason credit cards have the highest interest rates! The balances from credit cards aren’t meant to be carried over a period of months. Ideally, anyone using credit cards pays them off at the end of the month. However, as many consumers are aware, life can become less than ideal.

Pulling Money Out of Your 401k

It’s hard to justify this option unless you really are in the utmost bind. The reasoning is simple, you will get penalized for withdrawing from your 401k and you are essentially undoing your future retirement plans! It’s not a recommended option but many may consider it in order to replace an emergency savings fund.

Personal Loans

Personal loans can be quite expensive (less so than credit card interest rates however) and don’t often provide the flexibility of revolving credit lines. However, for some this option might help them get out of a bind.

Home Equity Lines of Credit

HELOCs have become a lot rarer in recent years and they aren’t offered as frequently as they have been in the past. You definitely can pull out money from your home (especially if you have a good amount of available equity) however this option also means that you’ll be adding more secured debt to your home!

Borrowing from Friends/Family

Depending on the relationship with your family, this could actually be the best option available to you. Family are a lot more likely to help you out in a bind and won’t require any forms or credit checks. However, make sure you “do right by them”. Write the terms down on paper if possible, the last thing you want to do is to lose family members over money!