Financial emergencies can strike when you least expect them and can immediately put stress on you and your budget. When you’re met with the unexpected and wondering how to break financial hardship, there are steps you could take to get back on track. 

This article will cover what a financial emergency is and outline an actionable plan to help you have long-term financial recovery strategies after an emergency. 

What counts as a financial emergency (and what doesn’t)

A financial emergency is any unplanned situation that affects your finances. Some financial emergencies are clear, while some can depend on your overall financial situation prior to them happening.

True emergencies:

  • Home repairs
  • Car repairs
  • Loss of income
  • Unexpected health issues
  • Loss of a loved one
  • Natural disasters

Not emergencies:

  • Taking a vacation
  • Going to or planning a wedding
  • Purchasing gifts
  • Non-essential home repairs
  • Known bills

Can be emergencies:

  • Dental care
  • Pet emergencies
  • Childcare disruptions
  • Legal issues

Here are 6 steps that may help you survive a financial emergency: 

1. Revisit your budget and spending

One of the first steps to take after sudden loss of income or other financial emergency is to rethink your budget. If you don’t have a budget, now might be an ideal time to create one.

If you do have one, review it to find areas where you can reduce your spending. Maybe you have a gym membership you’re not using or a cable package you can renegotiate. Plan your meals in advance. Before going grocery shopping, check to see that you’re only purchasing what you need. Or if you pay for services, consider whether you can do the work yourself.

You might also use budget tools or personal finance apps to track your spending and help you cut back. Put any savings you have toward your financial emergency or into your emergency fund for later if you’re planning ahead.

2. Ask your creditors about emergency debt relief

Asking for help from creditors may feel uncomfortable, but you should explore all your options during a financial emergency. If you’re having trouble making your credit card, loan, or mortgage payments, reach out to your lenders to ask about possible emergency financial relief.

Some banks may offer to defer payments temporarily. Be prepared to explain your situation clearly if you give them a call. You could also contact your landlord and utility companies to find out if they have a payment plan. It may help if you have consistently paid your debts on time. A good credit history may also help support your request.

3. Reach out for help when in a financial crisis

Turning to family members or close friends is another option for getting through your financial emergency. They may not be able to lend you money or provide emergency cash, but they might help you brainstorm ideas, job hunt, or simply provide meals and emotional support. They care about you and want you to succeed. You don’t need to go through this hardship alone.

If you do borrow from family, it’s important to protect your relationship. Have a written plan to pay them back and offer fair terms. Also, be aware that the IRS has rules about loans between family members to ensure that the loan is not treated as a gift. Consult a tax professional to learn more.

4. Know what government assistance programs exist for financial emergencies

Depending on the cause of the emergency, you might qualify for financial aid from the government. There are many programs from both the federal and state level that can help with financial emergencies.

Government assistance programs for financial emergencies:

5. Safeguard yourself from financial fraud

Unfortunately, some fraudsters take advantage of people during a time of financial crisis. They might offer quick-fix scams or spread false information by sending deceptive emails or creating fake websites. Financial exploitation is particularly prevalent among the older population.

If you receive emails or calls offering financial assistance or requesting personal information, be careful. Don’t click on links in suspicious emails or text messages. Reputable financial institutions will not solicit personal information that way. If you’re uncertain, contact your financial institution to verify the message. 

6. Consider a personal loan

If you don’t have an emergency fund, a personal loan may help you stay afloat. A personal loan is a type of installment loan that can provide a fixed interest rate and one set regular monthly payment so that you could budget and plan for the months ahead.

Begin by comparing interest rates and repayment terms. Ask about any fees that might be charged so that you’ll know exactly how much it will cost you to repay the loan. As you research your options, remember that the stated interest rate and annual percentage rate (APR) may be different if additional costs are involved.

How to get money in an emergency

Compare the following options for financial assistance in an emergency to better determine which works best for your individual situation. 

Option

Speed of funds

Overall cost

Considerations

Emergency Fund

Immediate if the money is already in your savings

No interest or fees since you already have the money

Using your savings will reduce your safety cushion until you replenish it

Creditor Deferral

Many lenders will let you know if they approve your request shortly after you apply

Payments will need to be repaid later, and interest can still accrue during deferment depending on the program

Can extend repayment timelines, create larger future payments, or increase total interest costs

Assistance Program

Will vary from days to weeks depending on the program

Often free or low-cost since many benefits don’t need to be repaid

Eligibility requirements, documentation, funding limits, and application wait times may apply

Personal Loan

Can often get approval and funds disbursed in a few business days

Interest rates and possible fees will depend on your creditworthiness and lender

Will add to your overall debt and repayments must be added to your monthly budget. Missed payments can affect your credit score

Recovering after a financial emergency

After you’ve secured the right type of assistance for your financial crisis, it may take some time to bounce back. You’ll want to rebuild your budget and include any new loan repayments or payment plans into it. You should also start replenishing your emergency savings, so you’re prepared the next time the unexpected happens.

A Discover personal loan might be a valuable lifeline to help you get through a period of financial hardship and stress. We’re here to help and support you; if you face a financial emergency, Discover has live customer service agents. They can help with your account activity, benefits, and more.*

There are no fees of any kind. And with Discover, you can see what your loan rate and set regular payment could be before you apply with no impact to your credit score.

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