No Savings? 4 Ways to Pay for Unplanned Expenses That Don't Involve Credit Card Debt

by Maurie Backman | Updated July 17, 2021 - First published on Nov. 10, 2019

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Here's how to cover unexpected bills without resorting to unhealthy debt.

Here's how to cover unexpected bills without resorting to unhealthy debt. 

There's a reason we're told to sock away three to six months of essential living expenses in a savings account -- because without an emergency fund, we all risk racking up debt when unplanned bills surprise us. But what if an unanticipated expense pops up out of the blue and you don't have any savings to tap? You might think your only choice is to resort to unhealthy credit card debt, but before you do, consider these less painful alternatives. 

1. Borrow against your home

If you have equity in your home, you can use it as an income source. Equity refers to the portion of your home that you actually own, and you can calculate it by taking your home's value and subtracting your mortgage balance. A quick example: A home worth $200,000 on which you owe $140,000 gives you $60,000 worth of equity, or 30% equity. 

Generally, you'll need at least 20% equity in your home to borrow against it, but if that equity is there, there are two ways you can access funds: a home equity loan or a home equity line of credit, also known as a HELOC. With the first, you borrow a lump sum. With the second, you secure a line of credit from which you can withdraw funds as the need arises, and then you only pay interest on that amount. Both options typically charge a lot less interest than a credit card, and they're fairly easy to qualify for, provided you have enough equity to work with. 

2. Borrow money from someone you trust

It's never comfortable to have to ask someone you know for a loan. But if you're faced with an unavoidable expense and no savings, that may be your best bet. Assuming the person you borrow money from is a close family member or friend, you probably won't be charged a whole lot of interest, if any, which will make it easier to pay back that sum. 

3. Sell items you're willing to live without

You may not have money in the bank when an unplanned bill arrives, but that doesn't mean you don't own items of value. In the absence of actual money, you can try taking inventory at home and selling things you no longer need, or are willing to part with. These could include electronics, designer clothing, and even pieces of furniture that aren't utilized often.

4. Try bartering

There are some expenses you have no choice but to pay for with cash. But before you resign yourself to incurring debt, try getting a little creative by bartering to cover their cost. 

Imagine a pipe bursts in your home, leaving you with a $600 emergency plumbing bill. If you're a web developer, you might point out that your plumber's business website could use updating, and offer to do that work in exchange for wiping out your bill. And if you rack up a $400 medical bill but have writing skills, you can ask your doctor's office to waive that fee in exchange for new content on its blog. 

Will bartering always work? Of course not. But it's certainly worth a try. 

Racking up credit card debt won't just cost you money in interest, you also risk hurting your credit score. If you're without savings and have a pressing expense to cover, try exploring the above options before whipping out your credit card. At the same time, work on building some cash reserves so that if something similar happens in the future, you're well prepared.

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