Does your family have a rainy-day fund to cope with a financial emergency? Unexpected situations can pose a financial burden, and having personal cash reserves can help you cover the expenses. But, while an emergency fund is an ideal way to deal with emergency expenses, not everyone can do so.
Based on the 2020 FP Canada Cross-Country Checkup, almost 40 percent of Canadians reported their bank accounts couldn’t survive a financial emergency. Without the funds necessary to weather through an unforeseen storm, it’s easy to find yourself with significant financial worry.
When it comes to financial preparedness for emergency expenses, many residents feel economic anxiety in British Columbia (BC), Canada. Only 36 percent of British Columbians have confidence in their capacity to get through unexpected events without adding more debts.
But taking on debts isn’t entirely a bad thing. Knowing where to access the right financing option can help you tide over challenging situations with ease. Below are the best places to borrow money in a family emergency.
A credit union is a traditional financial institution owned by a nonprofit cooperative. It provides a wide variety of financial services, such as deposits, loans, and investment products. But, unlike banks, a credit union provides loans with lower interest rates and fees. It’s also more lenient regarding eligibility requirements, meaning you can borrow money even if you have a poor credit history.
You can also borrow money online in BC. Online lenders can offer you loans with better interest rates and terms, since they don’t need to cover the operating costs of maintaining physical branches. Since most of the application process takes place entirely online, you can get the money you need within hours or days if you’re approved. But, before signing up on anything, ensure to research the lender’s reputation.
Peer-to-peer (P2P) lending is another way to obtain the money you need to cover a financial emergency. Through a P2P platform, you can apply for a loan, and it will match you to an investor willing to lend you the amount you need. Your credit score still matters, but P2P lenders have much greater leeway in weighing the factors. It’s possible to get approved even if you have bad credit. But the higher your credit score is, the lower the interest rate you can get.
Line of Credit
It’s also possible to apply for a line of credit (LOC) from a financial institution. It’s a predetermined amount of money that you can tap into any time you need. More of your credit line becomes available as you make monthly payments toward the balance, just like credit cards. The interest rates on the LOC are usually low. But, since they’re generally variable, it’s hard to predict how much it will cost you in the long run.
You can also utilize your home’s equity to pay for a financial emergency. In Canada, loan providers generally offer up to 80 percent on your home equity. However, the actual amount of loan you can take out may still depend on the market value of your home. And take note that you could lose your home if you fall behind on payments.
Prepare for an Unexpected Financial Crisis
Borrowing money or taking out a loan is only a temporary solution. Use your current fallback to prepare for a potential financial crisis in the future. You can start by developing better financial habits, such as budgeting and building an emergency fund.
- How to Handle an Unexpected Expense in an Emergency
- 4 Cashflow Pathways All Moms Should Know About When They Need Emergency Cash
- A Guide to Building an Emergency Fund
- Household Emergencies: How to Handle Unexpected Expenses
- How to Get the Funds You Need in an Emergency
- A Solution to Short Term Financial Emergencies