What are the Most Accessible Financing Options During a Crisis?

financing solutions

With a pandemic closing down the planet, many people are at risk of going without income for a long time. Sadly, most people cannot manage to lose their job, considering that three-quarters of full-time workers are living paycheck to paycheck.

A crisis like a pandemic brings despair, destruction, danger, and death. What better moment to search for financing solutions to help humanitarian causes and end human suffering? And even if the crisis is affecting more people daily, many cases worldwide remain unfunded or underfunded. Operational agencies must make hard decisions about which individuals to help, what organisations to support, and what operations require immediate funding.

During a scenario like the one the world is dealing right now, people can feel paralysed because they fail to find a solution to the financial fallout they’re experiencing. During these tough times, it’s wise to follow the piece of advice Arthur Ashe provided “Start where you are. Use what you have. Do what you can.” If you didn’t find necessary to build an emergency fund to help you during these tough times, don’t beat yourself up over this, you’re not the only one who lacks a plan B, on how to handle the situation.

This article deploys some recommendations on how to find some reliable financing solutions during a crisis similar to the one the world is facing. 

Payday loans

Payday loans, also named cash advances, are short-term loans that offer you around $500 and are relatively easy to obtain. You visit a storefront payday lender or register with one online, and they provide you with the money the same day.

Depending on the laws of the state, or the conditions the lender establishes, you will have to repay the loan in around two weeks. While some providers allow you to make the payment in instalments, others ask you to make one payment that also includes interest and fees.

Some states establish a maximum amount of fees the lender can set for the money they provide, that can range from $10 to more, for every $100 they offer.

Credit card cash advance

This is one of the most common ways to get some money during a crisis, but depending on the lender and conditions it sets, it can also be one of the most expensive. You must pay a transaction fee, that starts from 3% and can go up to as much as the lender wants, to which you add interest. Bankrate states that credit cards have one of the highest rates with the average one reaching 17%. But credit card cash advances have even higher rates, with the average one reaching 25%. Despite their high rates, they are one of the best solutions during a financial crisis because they’re more advantageous than payday loans, in the long run.

But before getting one of the two above options, you should check if your issuer provides no-interest balance transfers because many have introductory offers with 0% on purchases, for the first year.

When dealing with a financial problem, it’s best to contact the card issuer and ask them for a break. For example, during the present pandemic, many financial institutions allowed their clients to skip some payments without asking them for additional fees. Other organisations have extended their fee waivers and lowered reimbursements.

Personal loans

With a personal loan, you don’t need collateral like a house to get funds. This feature makes it an attractive solution when you need financial assistance, but you have no asset to borrow against. Check with your local providers and compare interest rates for personal rates because different entities have different conditions. Generally, personal loans that ask no collateral have higher interest rates than home equity loans, but it’s best to check with your local lender.

Usually, personal loan providers ask you to repay the money in a shorter term, from one to five years, and they automatically deduce the instalments from your checking account. So, you won’t miss a payment which may affect your credit score. When you need a small sum, you can get a personal loan to pay for your emergency expenses. It’s best to apply for one when you need less than $35,000. For any higher spending, financial experts recommend checking an equity loan.

A myriad of online lenders have popped up recently, and they make applying and obtaining a personal loan easier because all you have to do is register on a website. Bankrate states that the average interest rate with personal loans is 11%, but the truth is, rates widely differ. It’s best to use an online directory that compares the benefits multiple lenders offer.

Home equity

If you checked the news a couple of years ago, before the financial crisis from 2008-2009, you may have noticed that people often used their homes to get the highest amount of money their bank would provide. But the financial crisis triggered a housing crash, and borrowers registered damages due to falling prices. Nowadays, lenders have stricter standards when they offer home equity loans because financial organisations are warier when they provide significant funds to their clients.

However, besides their stricter requirements, home equity loans remain some of the most favourable financial aids on the market, and you can access them if you have an asset you can provide as collateral.

The fastest way to access equity is to apply for a cash-out refinance with your local bank. This means you refinance your current mortgage and get a bigger one or a loan.

You can withdraw the loan as a lump sum and establish a fixed monthly payment for a determined period. Most equity loans spread over periods more extended than 15 years because they involve the repayment of large sums.

Now that you know what financing options are available during a crisis, you should also come up with a plan that allows you to manage your income and savings, to make sure you’re ready to face the worst-case scenario. Start with identifying the financial expenses and obligations you must pay, and look for ways to save monthly. It’s best to have an emergency fund you can use to cover expenses during a crisis than borrowing money.

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