If you are facing a financial emergency, the last thing you want to do is panic. This is because if you panic you are more likely to make an impulse decision that may not be in your best interest. Instead, take the time to evaluate your situation and explore all of your options before making any drastic decisions, especially when it comes to borrowing money.
In a panic state, you may be willing to take out a loan with an extremely high rate of interest, like a payday or short-term loan, because it sounds like a good solution. However, this is likely to only put you further behind financially and will cause you to repay a lot more money then you borrowed in the first place. Below is a list of alternative benefit options you should consider whenever you are facing a financial emergency.
Try to Find An Alternative
Before you even consider borrowing money, try your best to find a better alternative solution. For example, if you owe a lender money, contact them immediately and explain your situation to them. Tell them what you know you are able to pay on a weekly or monthly basis and see if they are willing to set up a payment arrangement with you to pay off your balance. You will be surprised how willing many companies are if you are just honest with them and make an effort to repay the money.
Centrelink Benefits – Some examples are Australia specific
The Centrelink office provides special benefits that are designed to help people who are facing a financial emergency. Whether or not you are currently receiving benefits through the Centrelink office, you should contact them to see if you are eligible for any of these other benefits.
- Social Work Services. The Centrelink office provides social work services that help by providing support for people going through a crisis like domestic violence, homelessness, bereavement, or mental health issue. They can provide special counselling services, including financial counselling, and will ensure you are receiving all the Centrelink benefits you are entitled to.
- Crisis Payment. This is a one-time payment to help people going through a crisis. It can provide the equivalent of one week’s worth of benefits. You can receive this special payment up to 4 times within a 12 month time span.
- Advance Payment Option. If you are already receiving Centrelink payments, you may be eligible to receive an advance payment of up to $1,192.80 depending on your specific situation. You will be required to repay this loan, but slowly over time, which makes it more manageable.
- Special Benefit. This special benefit is specifically designed for those who are going through a severe financial hardship. Eligibility and the exact amount of assistance is dependent on your specific situation.
More Affordable Governmental Loans
If you feel that you do not have any other option other than obtaining a loan, start by seeing if you qualify for a special governmental loan. These loans come with little or no interest can be repaid slowly over time.
- No Interest Loans Scheme. This scheme provides no-interest loans up to $1,200 to help low-income earners facing a financial emergency. There are no fees associated with the loan and you can take up to 18 month to repay it.
- Step Up Loan. This program provides loans from $800 to $3,000 to low-income earners. It does include a very low interest rate, but can be paid back slowly over the next three years.
Avoid Emergency With A Special Savings Account
The best way to fight financial emergencies is to avoid them in the first place. Creating a special savings account that you can use in the event of an emergency can avoid the need to ever borrow money again. The government offers two programs the Adds Up and Saver Plus. Both of these savings plans offer $500 in matching funds once you reach your savings goals. This will help you save up to $1,000 more efficiently and then you will have this money set aside in case you ever need it for an emergency.
Hi, my name is Jon and I run Compounding Pennies. I’ve been interested in personal finance since high school and love writing and talking about it. You can learn more about me in the Authors section of this site.