Sometimes, you need liquid cash, but not sure where to “find” it, and don’t worry I haven’t lost my mind I would never recommend ridiculous 20%+ cash advances or the usually evil payday loans. The following ways should only be used when you need a good amount of cash, I would say the starting point would be a couple grand, not the amount you get for plasma or walking a neighbor’s dog.
For purposes of this post we are going to ignore why or how you got here, although if are looking into one of these ways to get some cash you should really dive deep into your life and determine if you are living it incorrectly.
Places to look When You Need Liquid Cash
Personal Loans & Line of Credit
The easiest type of loan to understand, but it may be difficult to obtain since the credit crunch. A personal loan has no ‘rules’ it can be at a fixed or variable rate, it can be a certain amount of time or a line of credit. Useful but dangerous – make sure you read and more importantly understand the terms you are agreeing to. Use a reputable bank or credit union, not your local loan shark!
Home Equity Line of Credit
Usually referred to its acronym, HELOC. This type of loan gives access you a pot of money to invade, but only to the extent that you choose to use it. Since the loan is tied to the equity of your home it may take up to 45 days to obtain one, although, I have seen ads purporting that they can do it quicker. It is usually an interest only loan option that is actually tax deductible, but variable in nature!
You should take note of 2 things – You mess up and go into default with this option your home could be at risk. Also, most HELOCs have what is known as a draw year, where it is only up to that year which you can draw down the funds; after the draw year has passed you will start to pay back interest and principal which could signficantly increase your monthly cash flow.
Home Equity Loan
Again, we are taking money from the equity of our homes, but in this case, rather than obtaining a line of credit (open pot of money to draw as you see fit) we are getting a check for $XX,XXX amount. The loan is going to be usually at a fixed rate of interest for a set amount time. The interest paid will be tax deductible. Similar to the HELOC, the HEL is tied to the equity of our home which leads to the problem of defaulting, and some banks offer HELs with prepayment penalties so read the fine print!
410(k) Loan / 403(b) Loan / 457 Loan
As I have discussed, sometimes a 401(k) is a better option than an IRA, and this is only one of the reasons. If you have to borrow, why not borrow from yourself? The interest rate is usually much lower when compared to traditional credit cards.
There is a huge drawback though – if you lose your job you may have to repay the balance in a very very short period of time.
Peer to Peer Lending Sites
While I haven’t used LendingClub.com*, I love prosper.com (Contact me for referral and possible bonuses). I have yet to give it a proper review or disclose my loan information but I will soon.
You may not get the best rates, but individual lenders might be more likely to fund your loan rather than a traditional bank or credit union.
Both sites allow lenders to lend micro-amounts (minimum of $25/bid) to individual borrowers for any legal reason. The note created is a 3 year amortized fixed note, so no scary variable costs associated. There are fees on both the lending and borrowing side, but this could be a good option for people who are unable to obtain cash elsewhere.
Dividends or Loan from Whole Life Insurance Policy
I have made it clear, that unlike other personal finance bloggers, I am pro-whole life insurance, and the access to quick liquid cash is just one reason. I won’t make the argument for whole life insurance here, (but if you have an interest you read about Comparing Whole Life to Term, using Whole Life to Create a Pension, or 6 Reasons to Buy Whole Life.)
Dividends on a Whole Life Policy may be enough to equal the cash you need, thereby eliminating the loan aspect of this whole post. More likely though you are looking for more than just the dividend, and depending on the Company, the money you borrow from a Whole Life Policy may take as little as a day or two to hit your account.
Like all the other options there are drawbacks which you would have to discuss with your agent, like the possibility of crashing your policy, thus destroying your coverage.
Am I missing any options?
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