Medical bills, emergency home repairs, and credit card debt are among the three top reasons that Americans are in debt today. These are the plagues of American personal finance that people work for years to get out of. If you find yourself in one of these sticky financial situations, you can feel stuck with no place to go. However, there is a multitude of options for you to choose from that may not take long to get you out of debt, and may have you, your home, and your FICO score come out on top. Here are a few ways that you can cover the cost of emergency home repairs without completely breaking the bank:
Use Your Friends to Cut the Cost
While this may not work for every situation, most home repairs can be solved easier, quicker, and cheaper as a team rather than as an individual. With this in mind, ask some of your friends, or handy family members, if they have any inexpensive solutions to the problem in your home in the first place. Then, take it a step farther and ask if they can help you apply that solution to your home.
If that friend owes you a favor, then they can repay you through this method. If not, then you get some bonding time with friends and family anyway. Some good friends can even split the cost of some repairs, which will help reduce your overall bill significantly. If you do choose this method of reducing the cost of home repairs, then consider telling your friends and family to use their credit cards as well for the same reasons that will be outlined later. That way, everyone gets some financial gains from helping you take care of your emergency home repairs.
Take Out a Personal Loan
If you do not have the money in your account to pay off a debt, then one of the fastest and simplest ways to come into contact with that money is to take out an unsecured personal loan in order to pay off the debt. This way, you can buy everything that you will need in order to complete the home repair without having to worry about being on a payment plan or anything of the sort. These are perfect for those short-term, relatively low cost repairs. These may not be the best option if you need to repair entire rooms in your home, but they will do well for small projects.
Furthermore, taking out a personal loan is an easy way to build your credit score, especially if you have taken out other types of loans. This is because FICO and the three major credit bureaus take into account the various types of loans and tradelines that you have open, and in good standing, when they start to craft your credit score. Taking out a personal loan will also help you only have to worry about paying back a single lender, rather than having to pay back a store or having to wait to order the things that you need to repair your home simply because you cannot pay for it.
Use a Credit Card
However you go about purchasing everything that you will need for this home improvement project, you should try your best to make as many, if not all, of your purchases on your credit card as well. This way, you can work towards creating a higher credit utilization ratio for yourself, another factor considered by FICO when it comes to the creation of your credit score. Your credit utilization ratio is simply the amount that you spend on a tradeline compared to the limit of that tradeline, where the tradeline is typically a credit card.
Using a credit card that gives you cash back on home improvement or all purchases will also work in your favor. If your credit card does not have a cash back program, then consider contacting your credit card company to see if you can either take out a new tradeline that does offer cash back on the purchases that you will need in order to make a home repair, or if you can somehow get the cash back rewards for your existing trade line.
When Worst Comes to Worst, Utilize a Home Equity Line of Credit
This is a great last resort if you have a major repair, and you are not sure what the exact time for repair or payment will be. This takes a while to fill out the paperwork for, and is a long term commitment, so it is not something to be entered into lightly by any means. You would pay the Home Equity Line of Credit at the same time that you would pay your existing mortgage, but with it comes the ability to draw cash out of it at any time that you need, using the equity from your own home to fund the whole process.
This works differently from a personal loan in that those are short term, require less paperwork, and are set for a specific dollar amount. Home equity lines of credit are none of those things, and they also use your home as collateral. Hopefully, after this major repair, you might even be able to improve your home in the wake of the emergency that needs fixing. When weighing your payment options, it is vital to consider these differences so that you know what you are getting into and know which is best for the type of repair that you need to make for your home.
No matter how you go about solving your home improvement struggle, you can come out financially on top of your game by following any of the above advice. Your credit score will thank you every time that you take out a personal loan or make a purchase using a credit card, and you will end up not only with a repaired and possibly improved home, but also a credit score that you will be proud of.