How to Handle a Financial Emergency

debt freedom Whether it’s a job loss, an unplanned medical expense or an emergency home repair, an unexpected stroke of bad luck can result in a serious financial problem. When the worst happens, there are ways you can cope with a financial crisis.

Prioritize expenses
Carefully assess and prioritize all of your bills and expenses. Then, look for areas that you can cut right away. Although food and shelter should be your top priority, other items such as cable and Internet can easily be cut. Anything that is not a complete necessity should be reduced or eliminated — luxuries aren’t worth keeping around if they could jeopardize your ability to pay for a necessity.

Talk to creditors
It may come as a surprise, but it’s in the best interest of creditors to help you make your payments — even if that means extending a lower interest rate or negotiating alternative terms. Don’t wait until you’re already severely delinquent in payments; contact your lenders first thing.

Credit card companies may extend a lower interest rate, create an alternative payment schedule or temporarily delay payments.
Your bank or mortgage company can temporarily or permanently modify your loan to make payments more affordable.
Some utility companies, including electricity and gas, offer special programs to help make payments affordable for those experiencing financial hardship.

Look into available assistance
Some assistance programs help those experiencing financial hardship. For example, people who have lost their jobs may qualify for unemployment benefits. Additionally, COBRA offers an affordable option to continue with health benefits.

For those who have been injured at work, workers’ compensation may be able to provide assistance. Furthermore, state or federal benefits including Medicaid, Social Security and Disability can offer aid to those who qualify.

Find other income options
When it comes to managing a financial emergency, a few ways to find extra income include:

Selling assets — Whether you sell small items in a garage sale or a bigger item such as a car, selling assets can help accrue extra income to pay for necessities.
Borrowing against your home — An equity loan or line of credit can help you pay off emergency expenses. However, keep in mind that borrowing against the equity in your home may put your home at risk if you are unable to make the scheduled payments.
Deferring retirement contributions — Instead of allocating retirement contributions, channel this money toward your current financial emergency.

If it becomes unmanageable
If you find that there are no options available for you to overcome the obstacles created by a financial emergency, don’t give up hope. Although bankruptcy is a solution for extreme situations, it also negatively affects your credit report for a long time. Alternatively, debt settlement offers a real strategy for immediate financial relief and complete debt elimination.

Debt settlement is an effective means of debt reduction. A debt settlement company can negotiate with creditors to reduce your overall debts in exchange for an agreement to meet a regular payment schedule. Debt settlement can lower debts by more than 50 percent of the balance. Only unsecured debts, such as medical bills and credit card debts, can be handled through debt settlement.

Are you in over your head and overwhelmed by a financial crisis? Take control of your financial situation today, visit Debt Freedom Tips to find out how.

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