At Spergel, we understand that there is nothing worse than feeling strapped for cash. When you need money now, it is too easy to fall into the trap of quick fixes – be it payday loans, relying on credit cards, or allowing tax debt to rack up. Unfortunately, it happens to many of us at some point in our lives, often for different reasons. Perhaps you have become unemployed, are going through a divorce or are facing unexpected medical bills. Whatever the reason, having more outgoings than income can leave you with very little funds fast. So, what should you do when you need money now? In this article, we cover the best and worst ways to get money fast when you need it. We also share how to gain debt relief so you do not have the stress of repayments over you. At Spergel, we have helped over 100,000 Canadians gain debt relief when they need it most and we can help you on your journey to financial freedom when you need money now.
Need money now? Ways you can secure funds fast
Sell your assets
Got a second vehicle, trailer, or unwanted clothes that you rarely use? Selling these assets can help you to get the cash you need when you need money now. Although selling your worldly possessions is not necessarily the nicest thing to do, it is far better than getting into a debt you will struggle to get out of, or indeed worth risking your retirement fund for.
Advantages
- Funds without borrowing any money
- Sell assets you no longer use
Disadvantages
- Loss of assets
Unsecured line of credit
An unsecured line of credit works in a similar way to a credit card. You can use it to borrow money up to a given, pre-approved limit, and you can have it ready to go to use only when you need it most. Once you have used it, you then only need to pay back the money you borrowed. Lines of credit are typically unsecured, which means they are not backed by collateral like your house or car. In Canada, unsecured lines of credit have a reasonably low interest rate (5-7%), no fees, and a quick setup. Usually, you can borrow amounts as small as $5,000 and up to several tens of thousands, making an unsecured line of credit a helpful and affordable option for emergency bills like home repairs when you need money now. You should note that unsecured lines of credit typically have minimum payments that are interest-only. If, therefore, you only make the minimum repayments, you will struggle to become debt free. Becoming reliant on lines of credit is also all too easy to do, which can in some cases only make debt problems worse. If you have a limited income or a poor credit score, you may also find it difficult to secure a line of credit.
Advantages
- Pre-approved funds to have on hand for when you may need them
- Funds not backed by your collateral so no risk of losing them
- Low interest rates compared to other forms of borrowing
- Borrow up to thousands of dollars
Disadvantages
- Can be difficult to pay back if you only make the minimum repayments
- Difficult to secure if you have a limited income or poor credit score
Tax-Free Savings Account
A Tax-Free Savings Account (TFSA) is exactly as described – a savings account where your stored funds are tax-free. Many Canadians choose to store their emergency funds in a TFSA as it is tax-free and can be withdrawn whenever you like without incurring any cost or penalties. If you need money now and decide to withdraw your funds, you are freed up to save more money in the account the following year. TFSAs are less straightforward when it comes to using them to save for retirement, instead of using a Registered Retirement Savings Plan (RRSP). If you are using your TFSA purely for retirement, you may wish to use an unsecured line of credit instead. If your money is invested in a TSFA, your rate of return each year may actually be higher than the interest rate you would be paying on a loan. You may not be able to turn these investments into cash without having to pay a fee or a penalty. If, on the other hand, you choose to take on debt instead of dipping into your savings, you need to ensure you have a manageable repayment plan in place.
Advantages
- Withdraw your funds at no cost
- The freedom to save up more money in the account the following year
Disadvantages
- Not ideal to withdraw funds if a TFSA is your primary retirement savings fund
Home Equity Line of Credit (HELOC)
A Home Equity Line of Credit (or HELOC) is a line of credit that is supported by the equity in your home as collateral. Because your house forms the collateral for the line of credit, you can often secure a HELOC with a much lower interest rate than that on an unsecured line of credit. HELOCs also enable you to borrow large amounts of money when you need money now. If, for instance, you have $50,000 equity in your home, you could probably secure a HELOC with a credit limit of a similar amount. Combining this high limit with low interest rates make HELOCs a popular choice among Canadians looking to fund home renovation projects. HELOCs do come with their own risks – they have variable interest rates and can soon rack up hefty debt if you continue to use it for expenses outside of your budget. It is worth nothing that the application process can take time, and you will need to undergo a financial stress test before approval, which can limit the amount of equity that can be used. You could also risk losing your home if you cannot make your repayments in full and on time.
Advantages
- Relatively low interest rate
- Borrow large amounts of money
Disadvantages
- Risk of losing your property if you cannot make your repayments
- Variable interest rates on repayments
- Lengthy application process
Credit cards
For smaller expenses like an unexpected vehicle repair, you could request a higher limit on your credit card, or apply for a new one when you need money now. If you have a good credit score, it can be approved quickly. One of the great things about credit cards is that provided you make your balance repayment in full by the time it is due, you will not pay any interest. This means you can essentially borrow the money for free. If, however, you do not make your payments in full by the deadline, when interest rates kick in they are very high – often around +20%. If you only make your minimum payments, it will be very challenging to repay your credit card debt.
Advantages
- Quick approval for increased credit limits or new credit cards
- No interest when you repay in full
Disadvantages
- High interest rates if you do not make your repayments on time
Need money now? The worst ways to secure funds fast
Cash advance overdraft
If you need money now, you may consider a cash advance overdraft. This is essentially the funds that banks will temporarily lend you if your chequing account is overdrawn and you have overdraft protection. This amount usually ranges from between a few hundred dollars to a few thousand. Although cash advance overdrafts can be a short-term solution if you need a small amount of money and you can repay it within a couple of months, if not it is not a good option. Cash advance overdrafts can trigger expensive fees and double digit interest rates.
Advantages
- Short-term solution if you need a small amount of money and can repay it quickly
Disadvantages
- Expensive fees
- Double-digit interest rates
Mortgage refinancing
Mortgage refinancing is the process of repackaging your mortgage in order to secure another loan on top of what is owed on your property. While it can offer more money with a low interest rate, it can have long term implications. This is because you are essentially extending the amount you owe over a long period of time. You may need to pay legal costs to have this mortgage refinancing put in place, and you could even incur penalties for breaking the terms of your current mortgage. Under the latest federal mortgage rules, you will need to undergo a qualification process to see if you are eligible also.
Advantages
- Borrow more money at a low interest rate
Disadvantages
- Extending the amount and period over which you owe money
- Potentially incur legal costs to put mortgage refinancing in place
- Potentially incur penalties for breaking the terms of your current mortgage
- Lengthy qualification process
Second mortgage
A second mortgage is a new loan that is taken out whereby the property you have a mortgage on is used as collateral. While your new lender will have secondary security over the property (your mortgage lender would have ‘first dibs’), you will need to pay a higher interest rate on any subsequent associated loan. If you default on your payments and lose your property, your mortgage lender would first be paid. While second mortgage interest rates are typically lower than those on unsecured loans, payments will also include both the principal and interest so that you know there is an end date for the payments, unlike lines of credit.
Advantages
- Lower interest rate than unsecured loans
- End date for the payments as both principal and interest are included
- You could amortize your debt over a shorter time period, and pay less interest overall
Disadvantages
- Consolidating debt via a secondary mortgage is a red flag that you may be having financial difficulty
- Having two mortgage payments is challenging
- You risk losing your house if you cannot keep up your payments
RRSP withdrawal
It is possible to withdraw your RRSP as another way to gain quick cash without acquiring potentially expensive debt. It does not come without consequences, however – you are depleting your retirement savings, and you will not have the ability to replay the funds you withdraw later on, unlike a TFSA. You will also need to pay taxes on any RRSP funds you withdraw.
Advantages
- Gain quick cash without acquiring potentially expensive debt
Disadvantages
- Reducing your retirement savings
- You need to pay tax on any amount of RRSP you withdraw
- RRSP needs to be included as taxable income on your tax return, which could push you into a higher tax bracket
Borrowing money from family and friends
Borrowing money from family and friends is a tricky one. Sometimes, it can work out just fine. But other times, it is not a great way to get through a challenging financial period. While loans borrowed from friends and family often have flexible repayment terms and very little interest if any at all, it is something to be very cautious about. In fact, many friendships and relationships with family are damaged due to borrowing money. What if you borrow an amount because you need money now, but are never able to make your repayments? While loans from a family member or friend may be fine if it is a small amount of money being borrowed for a short period of time and you can confident you will repay it shortly, it could be fine. Otherwise, approach this method with caution.
Advantages
- Flexible repayment terms
- Little – if any – interest
Disadvantages
- Can be damaging for relationships if you are unable to make your repayments
Private lenders
If you are struggling to secure additional funds via a more traditional method, you may be exploring private lenders as an option for borrowing. Private lenders typically cater to Canadians with a poor credit score, although the interest rates can be as high as 30%. For this reason, it is not a great option if you need money now. Unsecured loans or using assets like your home or vehicle may be better, and you can borrow up to tens of thousands this way.
Advantages
- A way for those with poor credit scores to secure additional funds
- A short-term fix provided you can repay your loan quickly
Disadvantages
- Extremely high interest rates of up to 30% to cover the risk of not receiving repayment
Payday loans
When you need money now, payday loans should always be the last resort. Designed as short term loans – that would literally see you through to pay day – they have extremely high fees and interest rates that can quickly escalate if you do not make your repayments on time. Another restriction of a payday loan is that you are restricted to what you can borrow – the Financial Consumer Agency of Canada defines the current credit limit as $1,500. If you do not make your repayments on time, your lender will probably take the repayments out of your bank account when your payments are due regardless. If a payday loan is your only option, it is likely that you need a form of debt relief.
Advantages
- Enable you to cover a small shortfall until your next pay day
Disadvantages
- Extremely high fees
- High interest rates making it a very expensive way to borrow
- You are not able to borrow much
What forms of debt relief are there when you need money now?
If you are looking at the options above in order to secure funds when you need money now, it may be that you need a debt relief solution instead. Depending on the kind of debt relief you need for your circumstances, you can reduce your debt by up to 80% or eliminate it completely. Here are some of the most popular forms of debt relief in Canada that we can support you with at Spergel:
Debt consolidation
If you have multiple separate debts, each with different interest rates, you would probably benefit from a debt consolidation loan. A debt consolidation loan is a new loan that is taken out to condense all your other separate loans. This has the advantage of simplifying your debts into a single monthly payment to help you stay on track. Advantages of debt consolidation loans include reducing your overall interest rate (usually you can secure a lower interest rate than all your separate rates) and extending the period of time over which you make your repayments. This can lower your monthly payments. It is important to note, however, the a consolidation loan will not reduce the amount of debt you owe.
Consumer proposal
A consumer proposal is the legal process of putting forward a manageable amount to repay your creditors each month with support from a Licensed Insolvency Trustee. If accepted, you can reduce your unsecured debt by up to 80%. You are committed to making your payment each month, but all remaining debt is cleared. As well as being a popular bankruptcy alternative, you can also keep your assets with a consumer proposal and you are protected from your creditors via a stay of proceedings. At Spergel, we have a 99% acceptance rate on any consumer proposals we file.
Bankruptcy
Filing bankruptcy in Canada is the process of assigning any non-exempt assets you may have over to your Licensed Insolvency Trustee in exchange for the clearance of all your unsecured debts. It is the best – and fastest – pathway to a fresh financial future. You will also receive full protection from your creditors so that you do not have the burden of overwhelming debt above you any more. Most first time bankrutpcies in Canada are discharged within nine months. At Spergel, unlike other bankruptcy firms, you will be assigned your very own Licensed Insolvency Trustee to walk you through each step of the bankruptcy process instead of passing you from person to person. We can also help you to rebuild your credit score.
Need money now and not sure what to do? Book a free consultation with one of our experienced Licensed Insolvency Trustees at Spergel. We will review your financial circumstances free from judgement, and will advise you as to the best form of debt relief for you. The sooner you reach out, the sooner you can begin a fresh financial future. Reach out today – you owe it to yourself.