5 Ways to Get Quick Money
- Author: Chris Remington
- Posted: 2024-07-12
People who are struggling to deal with some of the economic fallout from COVID-19 may find themselves needing to raise cash in a hurry. Their first instinct may be to go to the easy source of credit that is available to them. However, while credit cards let you go into debt quickly, the challenge is getting out of that debt. Thus, it may be worthwhile to look into different ways to get money quickly as you are struggling with your bills during this time. Here are five ways to come up with funds in a hurry without having to put yourself in the peril of credit card debt.
Tap Into Your Retirement Accounts
The stimulus act passed by Congress made it easier for people to break into their retirement accounts if they need them. People affected by COVID-19 can withdraw up to $100,000 without having to face some of the onerous penalties. The best type of retirement account to tap is a Roth IRA. You have already paid the taxes on this retirement account so you will not need to pay taxes in the future. If you raid your traditional IRA or 401(k), you may get some relief from penalties, but will still need to pay taxes on the amount you withdrew since you have not yet paid them. However, if you simply put that money aside and not use it, you can make it more manageable.
Borrow from Retirement Accounts
If you cash in your retirement savings, you will need to pay taxes on it. As opposed to selling retirement holdings, you may want to consider taking a loan from your 401(k). You can get money quickly with a low interest rate. The great thing is that, when you pay interest on a 401(k) loan, you pay the interest to yourself. The drawback to a 401(k) loan is that you also have to sell the holdings in order to borrow money. Thus, you would not be able to participate in the rally if and when the economy does rebound. The other drawback is that it is treated as an early distribution if you are not able to pay the money back and you are younger than 59 1/2.
Use Your Life Insurance
Depending on the type of policy that you have and its cash value, you can either withdraw money from your life insurance policy or borrow against it. When you have a permanent life insurance policy as opposed to a term policy, you have money that is available to you. Some of the money that you have paid becomes your cash value. It is a type of savings that is there for you to use as needed. You could also take out a loan against your policy. The drawback is that, if you cannot pay back the loan, it gets deducted from your death benefit if you pass away.
Take a Reverse Mortgage
While the most expedient thing to do would be to take a home equity loan, you may be placing your home at risk if your financial circumstances deteriorate to the point where you cannot repay the loan. Taking out a reverse mortgage may help unlock some of the value of your home. The benefit of a reverse mortgage is that the mortgage lender is paying you as opposed to the other way around. This way, you do not have to worry about losing your home entirely if you are not able to make payments because there are no payments to make.
You will be giving up part of your home in a reverse mortgage. The lender is essentially buying a part of your home from you and then paying based off of that. However, this loan option is not available to everyone. You must be at least 62 years old to take out this loan.
Sell Bond Funds
If you have a diversified portfolio, chances are that you have some money invested in bonds. These have not only help up in price, but some have gained in value as interest rates have fallen. It makes it easier to sell these than the stocks that you have holding onto in the hopes that they may rebound. These are liquid investments that you can always buy back for the same price or cheaper in the future because interest rates may never be lower than they are now.
