Emergencies happen. And if you are lucky enough, you have money in an emergency savings account for this very purpose. But what if the expense exceeds your savings? Most people would charge the cost to a credit card, hoping and praying that they can pay it back quickly. However, with high interest rates and minimum payments only covering the interest, credit cards can actually damage your financial health and impose a greater burden. Here are 7 alternatives to turn to:

1. Roth IRA Withdrawal: While it isn’t ideal to raid your retirement fund, you can withdraw any Roth IRA contributions without penalty or taxes.
2. Whole Life Insurance Cash Value: You can withdraw the cash value that has built up in your whole life insurance plan and have it deducted from the policy’s value.
3. 401(k) Loan: If your policy allows, borrowing from your 401(k) provides access to cash, and the interest you pay is paid back into your account. Interest rates are tied to prime and are often much lower than credit card interest rates.
4. 401(k) Hardship Withdrawal: A hardship withdrawal differs from a 401(k) loan because the funds are not paid back. The downside is that your retirement funds are lessened, and you may have to work longer to reach your retirement goal. Also, you will owe taxes on the amount withdrawn and may face additional penalties.
5. Personal Bank Loan: This option requires good credit and an established bank history; however, once approved, the lump sum is immediately available, and it is repaid with fixed monthly payments at interest rates that are typically lower than credit card interest rates
6. Payroll Deduction: Some employers offer low or no-interest payroll deduction loans to employees. This benefit may not always be expressed in the employee handbook, so talk to your HR department for more information.
7. Creditor Payment Plan: Contact the creditor directly and ask if they offer a payment plan. These plans are often flexible and allow you to propose a monthly payment amount that fits your budget.

Borrowing money is never ideal, but there are smart ways to do it. Avoid predatory services like pawn shops, payday loans, or title loans that come with high risk and higher interest rates. These alternatives may not work for everyone or every situation, but they provide options you may not have considered. For more information on financial counseling, schedule an appointment with a Financial Empowerment Counselor.

The Louisville Urban League is dedicated to fostering economic empowerment in order to elevate the standard of living in historically underserved urban communities, with our focus on Jobs, Justice, Education, Health, Housing, and Black Business.

We provide many services, including job coaching, record expungement, health navigation, financial counseling, and support for small businesses.

For more information call (502)585-4622 or visit lul.org.