Jan

How to Avoid Draining Your Retirement Account

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It can be tempting to borrow from a retirement account when an emergency arises, but often it is a very bad idea. With numerous other options for emergency cash from cash advance loans to peer-to-peer loans, you can save yourself the fees and penalties that eat up about 30 percent of your actual early withdrawal in taxes. Even in a situation where you are hoping to pay off high interest debt, it can be wiser to do it with a balance transfer than an IRA or 401K withdrawal.

Cash Advance Loans

If the need is short-term, a cash advance loan can be the ideal way to fill the gap. Some cash advance lenders even offer a free loan for first-time customers. The loan has to be repaid on the next paycheck cycle, so it is best for short-term purposes. It will cost far less overall than taking an early withdrawal and paying penalties and fees. These loans are even easy to get even if you have a bad credit history.

Credit Card

If you have good credit, you can use your credit line to help pay emergency expenses. It is a revolving credit line, however, and if you only make the minimum payment the loan can take years to repay. If you pay off the balance in full, your interest rate can be better than a cash advance. At any rate, if you don’t think you can repay the loan right away in your next paycheck cycle than you can always carry it on your credit card balance until more funds become available.

Peer-to-Peer Lending

If you know you will have a need in the future, you can use peer-to-peer lending sites to borrow money. You can get better rates than a bank, in some cases, but you will have to expose your credit standing to various online lenders.