An unexpected expense is hard to handle at any time, but it can be tough when the new year kicks off with a pricey trip to the doctor. Most people suffer from a holiday hangover in January, so they might not have any leftover savings or room on their credit cards to handle an unexpected fee.
Your savings and credit cards are your usual safety nets in difficult times. But with these backups unavailable, how can you handle the unexpected?
It’s easy to panic, but there are other options — whether you’re experiencing an emergency right now or later in the new year.
What to Do if Your Emergency is Happening Right Now
An unexpected medical expense or auto repair can happen at any time, even right now. If you’re struggling to find ways to pay for these bills, look no further.
1. Open Another Credit Card
Just because one credit card is maxed, doesn’t mean you have to write off all credit cards. Depending on your financial profile, credit card companies may approve you for another card to use in an emergency.
Watch for this new card’s APR, finance charges, and minimum payment policies. This way, you can get an idea of how much this account will cost.
If you don’t like the options you see, make sure you’re looking for unsecured credit cards.
But wait, what’s a secured credit card, you ask? It works just the same way as the other credit cards you have in your wallet. The only difference is you have to put down a security deposit before you can use it. That deposit usually sets the spending limit for the account, so it might not be realistic if you don’t have cash available.
Unsecured cards require no down payment, so you don’t have to put up any cash before using them.
2. Take out an Installment Loan
Another way to handle unexpected bills is through an online installment loan. These online loans give you a lump sum of money upfront to use as you wish, provided you’re approved.
Before you get this cash, you’ll receive a payment schedule outlining when you have to pay it back. Usually, installment loans are due back over multiple fixed, equal-sized payments spread out over time.
Like credit cards, there are a lot of options when it comes to installment loans. Research lenders and compare rates and terms to find something that fits your budget.
3. Negotiate a Payment Plan
If your emergency is bigger than any installment loan or credit card limit, it’s time to talk to your creditor. Most businesses have some contingency plans set up in case their customers can’t afford their bills.
In most cases, it ends up being a financing plan that allows you to pay for your bill over monthly payments. Like online loans and credit cards, these financing plans may come with interest and fees.
It’s also a good idea to talk to their billing department to ask if they normally waive fees for low-income customers.
When it comes to medical expenses, pair this tactic with asking for an itemized bill to make sure you understand every charge that goes into your balance. In some cases, an itemized bill will reveal mistakes or unfair charges that you can contend.
Next Year, Start Saving
In an emergency, payment plans, online loans, and new credit cards are options. But with some planning, you can be prepared for the unexpected on your dime. Sit down with your budget to see how you can save more, so you don’t have to go through this again.