Financial emergencies can happen without warning, pushing us into a sudden need for quick financial solutions. One minute your finances are ok, then out of nowhere you may need to pay for emergency repairs to your home or car, or settle an unexpected and expensive bill. You may even have to deal with sudden job loss or being unable to work. Many scenarios can happen, so what can you do to alleviate this in the short and long term?
Well, depending on the situation, there are a few different solutions that can lessen the burden of unexpected expenses and circumstances. But first, you’ll need to assess the situation before applying for any credit.
Assessment Before Action
Whilst it may feel like the right thing to do to solve your financial emergency, it’s crucial to assess your situation carefully before applying for credit. You don’t want to jump straight into a decision only for it to be the wrong one. Start by reviewing your available savings – could they cover the expense? This is by far the best option if you can do it as it means getting back on track with your finances without having to rely on credit. If you have emergency savings, even better, but this will depend on how much you have saved and how large the bill you need to pay.
Also, explore alternatives to borrowing, such as do you have insurance that covers the particular issue (such as house insurance for home repairs)? Do you have support from family or friends that could help you in the short term? Ask yourself key questions including how urgent is the expense? What happens if I delay payment? Could other resources be used?
The reason for doing this is sometimes we can be quick to turn to credit for help. You may find you can resolve the issue in other ways, which can be better for your finances overall. If then you still need to borrow, you have at least ruled out several different options first.
Financial Solutions Available
If you’ve determined that borrowing is your best option, and it fits in with your budget comfortably, you may be able to find same day loans that provide flexible repayments and quick funds into your bank account. As they are suitable for emergencies and unexpected expenses, you may even be able to get approval if you have a poor credit history. This will all depend on whether the lender can determine the loan amount and repayments you choose are affordable and sustainable.
Other options you can consider include an existing credit card if there is available credit. If you do so, be sure to make more than the minimum payments each month so that you can clear the debt quickly. It can be very easy to use a credit card and get into the habit of only paying the minimum, but this means more interest overall. If you can, repay the full balance when you next get paid. Similarly with an overdraft facility, if you have available funds within the limit, this can be useful, but be mindful that going over an agreed limit may bring charges and interest being added to your balance.
Best Practices for Managing Unexpected Expenses
Once you have chosen to borrow money, you’ll need to manage this responsibly. Here are some best practices:
- Prioritise Repayment – Aim to repay any borrowed funds as quickly as possible to reduce the amount of interest you pay. If you can repay the debt early, this can be beneficial and help you reduce the amount of interest.
- Understand Terms and Rates – Be fully aware of the terms, conditions, and interest rates associated with any credit. Ideally, you will have chosen a lender that has no hidden charges, is Financial Conduct Authority (FCA) authorised, and follows responsible lending guidelines.
- Budgeting – Ensure the debt repayments fit into your budget so you can sustain them. Review your finances and see where you can reduce outgoings or even boost your income to help.
- Start an Emergency Savings Fund – If you don’t have one already, start an emergency fund that you can save into regularly. This way you can prepare for the unexpected in future. Aim to gradually save 3 to 6 months’ worth of essential outgoings.
- Seek Advice – Don’t feel like you have to navigate financial issues on your own. Use independent resources such as Money Helper, Step Change, and Citizens Advice which are free and can offer helpful information and advice.
Preparation and careful decision-making are key in handling financial emergencies. Assess your options carefully and consider the long-term impacts of borrowing. Hopefully, you can then make the best decision in the moment when the unexpected happens.
Author – Kelly Richards
Kelly is the founder of the Cashfloat blog and has been working tirelessly to produce interesting and informative articles for UK consumers since the blog’s creation. Kelly’s passion is travelling. She loves her job because she can do it from anywhere in the world! Whether inspiration hits her while sitting on the balcony of a French B&B, or whether she is struck with an idea in a roadside cafe in Moscow, she will always make sure that the idea comes to fruition. Kelly’s insights come from her knowledge gained while completing her degree in Economics and Finance as well as from the people she meets around the world. Her motto is: Everyone you meet has something valuable to teach you, so meet as many people as you can!
Education 
Economics and Finance at London Business School (1999- 2002)
Hobbies 
Nature walks, watching cooking shows, and swimming at the local pool
