There are some costs in life that cannot be planned for. This includes emergency medical treatment, car repairs, home repairs, tech repairs, or the funeral of a loved one. These unexpected costs can sometimes be quite large. If you don’t have savings to dip into, you’ll have to find another way of covering these costs. But just what is the best way to deal with these kinds of unexpected costs?
Should you take out a loan?
Many of us resort to loans when paying for large unexpected costs. An emergency loan could be convenient, but you need to weigh up the costs in the long run. Can you afford to pay back installments each month? And are you prepared to pay huge extra amounts in interest fees?
Some loans are definitely better than others. You may be able to find specialist medical loans or funeral loans with low-interest rates. I remember that the Cooperative funeral home tried to offer me a loan when it came time to bury my son. Credit unions may also charge lower interest rates. You may also be able to use a low-interest credit card. These are better options than a standard high-interest emergency loan.
Are you eligible for legal compensation?
There are cases where others may be liable for the cost. Car accidents are a prime example – rear-end collisions are common unforeseen disasters in which you can usually claim legal compensation if you are injured. This could help to cover car repairs and medical treatment.
You may also be eligible for legal compensation if you were a victim of professional malpractice (i.e. if a surgeon botched an operation or a surveyor failed to identify a major fault when buying a house). Consider whether a third party is responsible – if so, seek legal advice and compensation.
Can you sell unwanted possessions to make up for the costs?
It’s possible that you may be able to sell your clutter to make up the costs. Many of us own items that are gathering dust and are of value. Take the opportunity to sell these for cash. If you need to sell these items quickly, it could be worth selling to a second-hand store. You’ll usually get more money by selling privately, but this could take you more time to find a buyer (especially if it’s a niche item) and there can be added risks.
Can you get help from friends and family?
Your friends and family may be able to help you out financially in the event of a disaster. This could involve lending you money or even giving you money. Don’t be too proud to ask for help if you need it. Borrowing from a friend or family member is much better than taking out a loan – you won’t have to pay interest and you may be able to pay it back more flexibly.
Are you covered by insurance or a warranty?
In some instances, an insurer may be able to cover the costs. For instance, things like storm damage may be covered by home insurance or you may find that a loved one that has died had a life insurance scheme in place. Notifying an insurer quickly is often important in these cases – leave it too long and the coverage may become void.
When it comes to broken appliances or damaged cars, consider whether the purchase is still covered by a warranty. When buying things brand new, warranties are very common nowadays and many of us pay for them and forget about them.
Making plans for the unexpected
Of course, none of us know exactly when certain costs will pop upon us. The best thing to really do is to have an emergency fund that you can rely on in case of large unexpected costs.