Coming Up With Extra Cash

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What would you do if you were suddenly faced with an unexpected expense of a few hundred dollars? If you are like most Americans, you’d be pretty stressed out about it. Studies show that the majority of Americans would not be able to cover an unexpected $500 expense without taking out a loan.

That’s bad news, but it doesn’t have to be like this. We can each find ways to come up with a little extra cash — and prepare a little better for next time. Here’s what you need to know about coming up with the cash you need when you need it.

Sell off some stuff

Going into debt is something that you really want to avoid if you can — especially when we’re talking about toxic short-term loans with high-interest rates. One way to avoid falling into debt is to generate the cash that you need by selling off some valuables.

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If you’re going to go this route, look for assets that have held their value well and that you do not absolutely need. Selling your computer at a big loss just to have to buy another one a month later is not a good move, but you might get a lot of money back by selling a musical instrument or a collectible that you can live without.

Make sure you’re not forgetting about any cash

You’d be surprised by just how often Americans leave cash on the table. Sometimes, we forget about refunds or court awards (or never knew about them in the first place). That’s why it pays to run the occasional search for any unclaimed money in your name. A trustworthy service that specializes in things like money lookups, background checks, and phone number identifications will be able to help you out.

Take out a loan — carefully

Sometimes, there’s just no way to get the cash you need without taking out a loan. That’s OK, but you need to be careful — short-term loans tend to have dangerously high-interest rates. Predatory loans like payday loans are designed to trap people in the cycle of debt. A better bet might be to work out an installment plan, get help from friends and family, or use a new credit card’s introductory rate (just be sure to pay it down fast to avoid interest when higher rates kick in — and to try to salvage your credit score). If you do take out a short-term loan, focus on paying it off as quickly as possible.

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Borrow against your assets

A better way to take on debt and get a loan might be to leverage your existing assets. Early withdrawals from a 401(k) are a bad move, but did you know that you can take out a loan that is secured by your 401(k)? Or what about taking out a home equity loan — a loan that essentially borrows cash against the value of your home? These collateralized loans tend to have lower interest rates than short-term payday loans, so they’re going to be a much safer and financially healthier choice.

Prepare for next time

It’s no fun scrambling to get the cash you need when you need it. It’s better to have that cash on hand already. So start saving for your next emergency expense before it happens. You should generate an emergency fund that can cover a few months’ worth of your expenses. If you have a safety net like that setup, you’ll have a less stressful time paying your bills and will be able to avoid dangerous types of debt such as payday loans and cash advances.