When an unexpected expense pops up, many people find themselves in a bind. In fact, a recent Federal Reserve survey found about half of respondents said they’d have to sell a belonging or borrow money to cover a $400 emergency expense.
The fix is, of course, an emergency fund. Even $500 in the bank can get you out of a pinch; having three to six months of expenses is even better. (See “How to Build an Emergency Fund.”) Having that kind of cash available means you can get by without pawning off valuables, selling your blood or leaning on the generosity of a friend or relative.
It takes time, discipline and extra money to build up that cushion. In the meantime, here are strategies to earn fast cash today, increase your income on an ongoing basis and cut your monthly spending. Combined, they’ll help keep you out of this kind of bind going forward.
Get your hands on extra cash today
- Sell old cell phones. There’s a good chance you’re sitting on cash here: A study released last year found that half of consumers have at least one old cell phone gathering dust. You can sell your old phone on sites such as Swappa and Gazelle, but to get cash today, an ecoATM is your best bet. Consider selling old MP3 players and tablets, too.
If a company like this isn’t available in your area, try the Craigslist jobs or gigs sections, which often have similar postings for short-term work in food-service, housekeeping and general labor jobs.
Ask for help
- Community loans and assistance: Local community organizations may offer loans or short-term assistance to help with rent, utilities or other emergencies. NerdWallet has compiled a database of payday loan alternatives available to residents in nearly two dozen states. You may find local churches make small loans at very low rates. Community centers and nonprofit associations in your area may also offer small loans.
- Bill forbearance: Some creditors such as utilities or cable-television companies don’t charge interest. Find out whether they’ll accept delayed payments. Use whatever money you save from not paying those bills to cover emergency needs. If you are unable to pay consumer debts such as auto loans or mortgages, explore your options with the lender first before turning to toxic high-rate loans.
Borrow from yourself
- Payroll advance: Ask your employer for a cash advance on your pay, which usually doesn’t cost you any fees and is repaid by deduction. Some companies also offer low-cost loans to workers in crisis situations. You might consider ActiveHours, an app that offers workers advances repaid in a lump sum on payday at no interest — it does ask for a donation, though, and requires access to your bank account and work time sheets.
- Borrow from retirement accounts: A 401(k) or IRA loan is not without risk. You can borrow from your IRA once a year if you put the money back within 60 days. If your employer allows 401(k) loans — not all do — you can typically borrow as much as half your account balance, up to $50,000, and you have five years to repay it. However, if you don’t make payments for 90 days, it’s considered taxable income. And if you quit or lose your job, you typically have to repay the 401(k) loan shortly thereafter.
- Borrow against life insurance: If you have a life insurance policy that has cash value (sometimes called permanent life insurance), you can borrow against it and have the rest of your life to repay it. If you don’t repay, the insurance company subtracts the money from the policy payout when you die. You can’t borrow against a term life insurance policy, which is the more common type.
Take out a loan
- Credit card cash: If you have a credit card and the account is in good standing, a credit card cash advance is a much less expensive option than a payday loan. You’ll pay a fee, typically around 5% of the amount borrowed, plus interest, which can be around 30%.
- Look for a Payday Alternative Loan. Some credit unions offer small, short-term cash advances known as Payday Alternative Loans, or PALs.Federally chartered credit unions can’t legally charge more than 28% APR on these small, short-term loans. That rate can’t be called inexpensive — but it’s much better than payday loans, which have triple-digit APRs.
- Take out a personal loan. Some lenders can fund a personal loan in a day; if you have good credit, you’ll probably have many choices. If your credit is a challenge, you’ll need to find a lender that not only delivers fast cash but also accepts poor credit. Rates for bad credit through mainstream lenders top out at 36% APR. You may find other lenders offering fast funding without a credit check, but you’ll pay triple-digit interest rates. Don’t fall for it.
Increase your income going forward
- Rent out a room. Sites like Airbnb aren’t just for people who have vacation homes to rent out when they’re not using them. Many of the site’s listings are for extra rooms — or even shared rooms — in the owner’s house, meaning you could stay put while bringing in some cash, particularly if you live in a reasonably desirable area. (Check local ordinances to make sure short-term rentals are allowed.)
Creating a listing on the site is free; there is a 3% service fee when a reservation is made. You can easily estimate how much you might make on the Airbnb website. For the sake of an example, the site estimates that a one-week private room rental in relatively rural Staunton, Virginia, could bring in $725. The service releases payment to the host 24 hours after the guests check in.
- Moonlight as a dog sitter. Technology is on your side here, too, with sites including DogVacay and Rover matching pet owners with dog sitters and walkers. You can choose to host the dog or stay at the owner’s house (and — here’s an idea — rent out your place through Airbnb while you’re gone). Rates are between $20 and $60 a night in most areas, though they can skew higher or lower depending on the location and the amount of work involved.
- Become a rideshare or delivery driver. These are jobs you can do in the evenings or on weekends, using your own car (and, unfortunately, your own gas). Companies like Uber and Lyft match you with people willing to pay for a ride, and delivery services such as OrderUp and Postmates pay you to deliver takeout and other items. How much will you make? Here’s a look at what Uber and Lyft drivers earn in various cities; the range seems to be $10 to $15 a trip. OrderUp says its drivers earn $20 an hour, and Postmates boasts $25 an hour.
Reduce your monthly spending
- Cut your insurance premiums. One of the dirty secrets of the car insurance industry is that premiums for the same driver for the same coverage can vary by hundreds of dollars from company to company. Each company does its own math; that’s why it pays to compare car insurance quotes.
If you like your carrier, it may worth your time to review the dozens of discounts it may have available. You can get 10% off or more for everything from making good grades to completing defensive driving training to going at least three years without an accident.
The same is true with homeowners insurance: Shopping around can save you 10% to 15%, as can discounts for things like having a home security system, staying claim-free or being a nonsmoker. And many insurers offer discounts for having both car and homeowners or renters policies with them.
- Consolidate your debt. If you’re struggling to keep up with multiple debt payments, you may be able to consolidate those balances — from credit cards, medical bills, store financing or other charges — and lower your payments with a personal loan. There are even a few lenders that can fund the loan inside of a day. Refinancing $5,000 worth of debt from a 10% interest rate to a 5% interest rate could save you more than $800 in interest over the life of the debt.
If you have a good credit score, you can do a balance transfer of high-interest rate credit card debt onto a new card with a 0% introductory interest rate. Just be sure you can pay off the balance before the rate balloons at the end of the introductory period.
- Refinance your student loans. Borrowers right now are benefiting from low interest rates and a competitive private student loan refinancing market, and there are refinancing options available for most credit scores. It’s worth checking into whether a refinance could save you money (especially when the average borrower through NerdWallet’s refi platform saves more than $11,000).
- Change your cell phone plan. If you value money in your pocket over a fancy phone, look into the cell phone providers that are offering rock-bottom rates these days. FreedomPop offers basic voice and data service for free. The catch with these services is you often have to buy a phone outright, or bring your own. So maybe you don’t want to sell that old phone quite yet. You can easily find a prepaid cell phone plan for $30 a month or less as well.
4 fast-cash sources to avoid
Payday loans: Payday loans are short-term loans repaid in a lump sum made to people who have a source of income and a bank account. Your credit isn’t a factor, but if you have existing payday loans outstanding you may not be able to get another one. Interest is usually expressed as a “fee” — $15 per $100 borrowed is typical — but the trap is that borrowers typically have the option to pay another “fee” rather than settle the loan. Over time, those fees add up. A typical $15 fee on a two-week loan is nearly 400% interest on an annual basis.
Payday installment loans: Available at both storefronts and online, these loans stretch repayment terms to as long as three years. You don’t need good credit — they often advertise themselves as no-credit-check installment loans — but you typically must meet the requirements of a payday loan: a paycheck and a bank account. Interest charges mount quickly over time: A $2,000, three-year loan at 400% APR will end up costing over $16,000.
Auto title loans: These short-term loans, where they’re legal, require you to hand over the title to your vehicle as collateral for the debt. They’re often compared to payday loans, and the interest rates are comparable, but they can be even worse: If you don’t repay, the lender can seize your car.
Credit-building payday loans: Most payday lenders don’t report on-time payments to the big credit bureaus, which would help your credit scores. Some lenders do, and they also reduce interest rates on subsequent loans to reflect improved credit. Oportun, Rise or Fig Loans all offer installment loans at a lower cost than a payday outlet — but their rates are still many times those of mainstream lenders. We don’t recommend these loans unless the only other option is a traditional payday loan.
Updated Sept. 2, 2016.