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Need Cash Fast? 3 (Slightly Controversial) Ways to Get Money in a Pinch

Japanese man showing empty pockets
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Unexpected expenses come up for even the best of planners. That's why you have an emergency fund at the ready, right? Right?

The hard truth is that many of us, myself included, have found ourselves in a cash crunch with no emergency fund to back us up.

Here's how can you get money fast -- without paying outrageous interest rates or pawning your grandmother's pearls. These options are not without caveats, and should be considered only in dire straits -- true emergencies. I have used all of them successfully over the years, and all can be good strategies if you know how to use them.

Option 1: Borrowing From Your Nearest and Dearest - the Right Way

This first option is perhaps the most obvious, but it's also often the fastest and least expensive. That said, if money is an issue at all in your relationships (or if you have a reputation for borrowing money and not repaying it promptly), skip this tip and move on to the next option. Introducing money tension into a close relationship just isn't worth the headache.

If there are no prior money hang-ups between you, then consider asking a close relation or a bosom buddy for a loan, especially in short-term cash crunch situations when you know you'll be able to repay it soon.

When you make the request, be clear about why you need the money, and when and how you'll repay it. Then put this all in writing and sign it and have the other person sign it as well. It may sound silly, but it will provide some peace of mind to the lender and show her you're taking the loan seriously.

If the loan is just for a few weeks or months or is for a modest sum, you may not need to bother with paying interest, but the IRS will require minimal interest to be paid on more substantial amounts. Always check the rules first to make sure you're within the law.

Pros:
  • Often the fastest way to get cash
  • No fee to borrow and low or no interest
  • Flexible repayment
  • No hit to your credit
Cons:
  • Could harm relationships
  • May not feel as serious as an institutional loan

Option 2: A 401(k) Loan
I know, all the experts warn against borrowing from your 401(k), and it's true: You will take a hit by not having that money in the market growing for you during the time the loan is outstanding -- and that could cost you big over time.

So why would you even consider this option? Assuming your 401(k) plan permits loans (most do), you're borrowing from yourself, which means the interest you're paying back is yours too. There may be a small setup fee associated with the loan, but essentially you are both borrower and lender. You can generally borrow up to 50 percent of your vested balance, up to $50,000.

Payments are automatically deducted from your paycheck, so you don't have to worry about accidentally missing one. You don't have to go through a credit check and the loan isn't reported to credit agencies. You can choose the length of time you need to repay (up to five years) and there is no penalty for paying the loan back early.

There is one pretty big caveat. If you leave your job (voluntarily or otherwise), you must pay the loan back within 60 days or you'll be hit with an early withdrawal penalty and have to pay taxes at your current income tax rate on the unpaid amount. So you'll want to be very confident that you'll be staying with your employer for the term of the loan.

If you decide a 401(k) loan is your best choice, you can often request one online or by phone and have a check within seven to 10 days. Your HR department can guide you through the process.

Pros:
  • You're paying the interest to yourself, not a bank
  • No credit checks or credit rating dings
  • You can get the money quickly with little to no hassle
Cons:
  • Your balance at retirement will likely be lower than if you had not taken the loan
  • If you leave your job, you could be hit with significant penalties

Option 3: Credit Card Advance

If you thought 401(k) loans were controversial, credit card advances are doubly so. Also called cash advances or balance transfers, they are considered a terrible idea among personal finance gurus. And there are important conditions to be aware of.

But these days, provided you have good credit, they can be a good way to get your hands on money quickly, sometimes in as little as a day. (Citibank offers 24-hour transfers directly into a bank account for existing cardholders in good standing, for example.)

Here's how it works. Go online to your credit card company's website or call the number on the back of the card and ask if it is offering any special deals on advances. You may also get blank "balance transfer" checks in the mail from time to time. Despite the terminology, you can often use these just like a regular check -- only the money is charged to your credit card and will likely have a fee attached.

You'll want to consider carefully both the balance transfer fee (usually a fixed percentage of the amount you borrow, though you can sometimes find no-fee promotions) and the interest rate on the advance. And you're not stuck with your existing cards. If you have good credit, you should be able to get your hands on a 0 percent offer for a set period of time -- anywhere from six to 18 months is standard. Compare offers to find the best combo of fee and rate for your personal situation -- Bankrate.com has a good tool for this exact purpose.

Make sure you can repay the full amount before the offer period ends. Even $1 left on the balance after that date can trigger hefty back-interest charges. So mark that date in red on your calendar and aim to repay a month early... just to be safe.

One last tip: Try to use a card that does not carry any existing balance, and then don't make any new charges on it while you're paying back the advance. Some cards have unfavorable rules about how payments are split between an advance and new charges.

Pros:
  • Can usually get the money within a week, sometimes within a day or two
  • No credit check if you're using an existing card
Cons:
  • You have to set and keep to your own repayment schedule, with hefty penalties if you forget
  • You will usually pay a 3 percent to 4 percent balance transfer fee
  • Your credit could take a hit because of the higher balance

Prevention Is Your Best Option
Once your cash crunch has passed, a simple way to avoid being in this situation in the future is to continue setting aside however much you were paying toward the loan into a savings account.

In a world of direct deposits, I also make a rule of depositing physical checks (usually reimbursements or gifts) into my savings account as well. Some people I know devote half of any raise into their savings stash, while others simply have a small sum diverted to savings automatically each month.

Whatever you choose, it's crucial to start putting aside funds for the next cash crunch. It's surprising how quickly your emergency fund can grow over time -- soon, you'll be the one friends and family will be hitting up for cash.

Robyn Gearey is a Motley Fool contributing writer.


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September 27 2013 at 9:16 AM Report abuse rate up rate down Reply
Cindy

Do not lend money to friends and family. If you have the means, just give them some money if they have a true emergency like a child who needs medical care.
If you can't help them, you need to be direct and honest.
As to you who want the money, is it a true emergency? If you are about to be evicted, do you have a place you could go or will you be homeless?
If your car broke down, can you take the bus to work until you can get the money to fix the car or will you lose a job or need to take a child to chemotherapy?
If you can't pay the electric bill, can you make a payment plan with the company or will you be in the dark on a cold winter's night.
You kids need clothes for school? Do they just want a fashion statement or have your kids outgrown the clothes? Are there other siblings, friends, or cousins who have clothes they could wear for now?

September 27 2013 at 8:31 AM Report abuse rate up rate down Reply
dedndogyrs

All you have to do is watch Judge Judy to see how may friendships have been destroyed over borrowing money. It\'s rarely paid back because the kind of person who doesn\'t live within his/her means and put money aside for emergencies andthen panhandles money off of hardworking people who don\'t have that much themselves is the kind who probably won\'t pay it back. True emergencies, like needing an operation, is different. In that case I just give them the money.

September 27 2013 at 7:51 AM Report abuse +1 rate up rate down Reply
Don Bryan

DON'T Never Buy if U can't pay Cash...Learn to Save

September 27 2013 at 5:16 AM Report abuse rate up rate down Reply
usmaels1

And what in this article was news we did not know already? Lame...even for AOL/HP...

September 27 2013 at 12:42 AM Report abuse +3 rate up rate down Reply
rrgalvanjr

Open a "massage" center for happy endings

September 25 2013 at 2:40 PM Report abuse +3 rate up rate down Reply
2 replies to rrgalvanjr's comment
DEBBY

no

September 26 2013 at 8:08 PM Report abuse -1 rate up rate down Reply
1 reply to DEBBY's comment
Seefeld41

why not

September 27 2013 at 2:45 AM Report abuse rate up rate down
t10093

Buck, buck, buckarooooooooooooooooooooooo...

September 27 2013 at 6:43 AM Report abuse rate up rate down Reply