What Is Considered a Financial Emergency?

An emergency for one person might not be an emergency for someone else. Perception is important when considering this issue. With that in mind, our definition of a “financial emergency” is a situation with a real possibility that emergency loans might be needed to cover the financial liability. Remember, not all situations are financial emergencies, but here are some common examples:

1.Expensive auto repairs

Cars break down. You can delay the inevitable with regular maintenance, but eventually you may need an expensive repair, or you’ll be looking for a new vehicle. Financing expensive repairs can be a financial emergency. There’s a good chance you’ll need a loan, some dealer financing, or you’ll use a credit card with a high spending limit to cover the expense.

2.Eviction or foreclosure

There are few situations in life more stressful than being evicted or having your house foreclosed upon. This qualifies as a financial emergency.  Help may be available if you’ve already exhausted all solutions with the landlord or mortgage lender. While an appeal to the housing court might slow the process down, you should prepare for the worst outcome and consider applying for a loan or find out if you qualify for any government assistance.

3.Emergency medical care

Being sick is hard enough. Finding out what you need to pay to get better can often add to the pain. Emergency medical care is generally expensive because of the number of personnel who are involved, including medical professionals, along with the equipment needed to stabilize or even save the life of the patient. Insurance doesn’t always cover all the costs of a medical emergency. You may need a loan.

4.Non-insured damage to property

This is another scenario where insurance may or may not cover costs depending on the insurer’s policy and the circumstances of the damage-causing event. Many homeowner insurance policies don’t cover flood or storm damage. If you live in a flood zone, check your coverage page. If you are covered, find out how long it takes to process a claim. You may be stuck paying the bill and then waiting for reimbursement from your insurance company. That’s a financial emergency.

5.Unexpected job loss

Job security isn’t what it used to be. Companies rise and fall. Workplace environments change. Some businesses choose to outsource or run remote teams. Regardless of the reason, there’s a chance you may find yourself suddenly out of work. Losing your source of income without notice is a financial emergency. If you’re eligible, unemployment benefits might help, but chances are you may need a loan or some other type of assistance to get through what could potentially be an extended period.

The Bottom Line

Any situation that requires you to pay for something you don’t have the money for could be classified as a financial emergency. It’s different for everyone. The important thing to know is that there are options to help navigate the situation.

Taking out a loan; applying for government assistance; or getting approved for a new credit card with a low or even 0% introductory annual percentage rate (APR) or receiving a promotional APR offer from your current card issuer, each for a limited time, may help reduce the strain. Carefully review all available options before deciding which one is the best for you.

 

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