Pay for an emergency home repair
Pay for an emergency home repair

Select’s editorial team works independently to review financial products and write articles that we think our readers will find useful. We earn commission from affiliate partners on many offers, but not all offers on Select are from affiliate partners.

Editor’s note: The APYs listed in this article are current at the time of publication. They can fluctuate (up or down) when the Fed rate changes. Select will be updated as changes are made public.

Once in a while, life throws us into a loop and the next thing we know, we find ourselves with a broken computer, an expensive ticket, or in some more extreme cases, an expensive home repair that needs our immediate attention. .

If you are renting an apartment, you can simply call the building management and ask them to take care of it for you at the landlord’s expense. But when you own, the responsibility (and the bill) rests solely on your shoulders.

Depending on the problem, an at-home repair can really take your bank account by surprise. But two popular ways to cover such an expense can be to either dip into your emergency fund or take out a personal loan. The option you choose will ultimately depend on the cost of repairs, your current credit score, and your ability to take on additional debt, but here are some next steps you should think about.

Subscribe to the Select newsletter!

Our top picks delivered to your inbox. Shopping recommendations that help you improve your life, delivered weekly. register here.

Remember to turn to your emergency fund first

Use the money in your emergency fund before you go into more debt. Your emergency fund is meant to be used for unexpected expenses — like a surprise home repair — so it’s fine to resort to this money. Plus, it will help you avoid going into more debt to support the cost. And once you’ve used some or most of it for the repair, you can always take steps to get started. replenish your emergency fund.

If you’ve kept your emergency fund in a high-yield savings account, you may be able to replenish your balance a little faster thanks to the higher interest rates these accounts typically offer. True, the interest rate will not earn you hundreds of dollars a month, but the earnings are still higher than those of a traditional bank. According to the Federal Deposit Insurance Corporation (FDIC), the national average APY on savings accounts is only 0.07%. That’s more than 10 times less than what the best high-yield savings accounts offer.

Select named the Marcus by Goldman Sachs High Yield Online Savings as the best high-yield savings account thanks to its no-fee structure (seriously, it doesn’t charge monthly fees, excessive transaction fees, or overdraft fees). You will access your money by making transfers to an existing checking account and paying with your debit card or going to the ATM to withdraw cash. But if you prefer an account that simplifies the withdrawal process, the Synchrony Bank High Yield Savings account actually gives you a debit card. This way, you can go to any ATM and withdraw your money without having to make a transfer first.

Marcus by Goldman Sachs High Yield Online Savings

Goldman Sachs Bank USA is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

    None to open; $1 to earn interest

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Synchrony Bank High Yield Savings

Synchrony Bank is a member of the FDIC.

  • Annual Percentage Yield (APY)

  • The minimum balance

  • Monthly fee

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle *Cycle withdrawal limit of 6/instructions is waived during the Coronavirus outbreak under Regulation D

  • Excessive transaction fees

    None, but may result in account closure

  • Overdraft fees

  • Offer a current account?

  • Offer an ATM card?

Use a personal loan as a last resort

If you don’t have an emergency fund or aren’t comfortable with the possibility of wiping out your savings to repair your home, you may want to consider getting a personal loan to finance this expense.

Personal loans generally have lower interest rates than credit cards. APRs for personal loans average 9.58%, according to the The most recent data from the Fed. In contrast, the average credit card interest rate is around 16.30%, so a personal loan can sometimes be a more affordable alternative to using a credit card for a large expense. , unless you are using a 0% intro APR credit card (however, keep in mind that the actual interest rate you receive will depend on your creditworthiness).

And, personal loans are made for expenses such as home repairs, a wedding, funeral, vacation, or other major expenses – you can usually borrow up to $100,000, but different lenders have loan limits. different loans. The money will have to be repaid in fixed monthly amounts over a specified period of time. This is called the term of the loan and it varies by lender.

And, yes, you can still get approved for a personal loan if you have less than ideal credit – Beginner personal loans and Personal Loans Before are two options for people with fair or good credit. The Avant Personal Loan provides financing as early as the next business day after your approval so you can start fixing that roof or fixing that plumbing problem as soon as possible.

Beginner personal loans

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, credit card refinancing, marriage, moving or medical

  • Loan amounts

  • terms

  • Credit needed

    FICO or Vantage score of 600 (but will accept applicants whose credit history is so poor that they have no credit score)

  • Assembly costs

    0% to 8% of target amount

  • Prepayment penalty

  • Late charge

    Greater of 5% of monthly amount past due or $15

Personal Loans Before

  • Annual Percentage Rate (APR)

  • Purpose of the loan

    Debt consolidation, major expenses, emergency expenses, home renovation

  • Loan amounts

  • terms

  • Credit needed

  • Assembly costs

  • Prepayment penalty

  • Late charge

    Up to $25 per late payment after a 10-day grace period

At the end of the line

Ultimately, the decision might come down to the cost of the fix and how comfortable you are with taking on more debt at the moment. If you don’t want to touch your emergency savings and can afford another monthly payment, you may be more inclined to take out a personal loan.

Remember that taking out a personal loan means you’ll be paying interest, so you’ll end up paying more than if you were to just use your emergency fund. If you really don’t want to increase your existing debt, it might be best to use what’s in your emergency fund.

Check out Select’s in-depth coverage at personal finance, technology and tools, The well-being and more, and follow us on Facebook, instagram and Twitter to stay up to date.

Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.

LEAVE A REPLY

Please enter your comment!
Please enter your name here