Emergency home repairs can cost you thousands of dollars and easily break your budget. That’s why our viewer Chris reached out to Rossen Reports, asking, “What’s the best way to pay for an emergency home repair without draining your savings?”First, always check your homeowner’s insurance to see what’s covered. Also, see if you’re eligible for any government assistance programs, especially programs managed by your town or county. Then, pay for whatever you can upfront in cash. Experts recommend saving 1 to 4% of your home’s value to cover any emergency costs that arise.If you have an expensive repair or you’re planning a remodeling project, here are some other options available that will ultimately depend on your financial situation:Home equity loan or home equity line of creditBoth of these are widely available from banks or credit unions and allow you to borrow against the appraised value of your home. With a home equity loan, you take out a lump sum and then make fixed payments. A home equity line of credit gives you a revolving line of credit, which could give you more flexibility. Both typically come with lower interest rates compared to traditional loans, and offer tax benefits, but require you to put up your home as collateral.Personal loansYou could also apply for a personal loan from a bank or credit union. The interest rates on personal loans are still typically lower than the interest rates on credit cards. You’ll also have a set repayment timeline, so you’ll know exactly when you’ll be debt-free.What about credit cards?Most finance experts recommend you think twice before reaching for one of these to cover an emergency repair. This is because credit cards come with the highest interest rates, and carrying too high of a credit card balance can damage your credit score.Have a question for Jeff Rossen? He’s answering your consumer questions every Friday in the new segment “Rossen Responds.” Email your questions to him at RossenResponds@hearst.com.
Emergency home repairs can cost you thousands of dollars and easily break your budget. That’s why our viewer Chris reached out to Rossen Reports, asking, “What’s the best way to pay for an emergency home repair without draining your savings?”
First, always check your homeowner’s insurance to see what’s covered. Also, see if you’re eligible for any government assistance programs, especially programs managed by your town or county. Then, pay for whatever you can upfront in cash. Experts recommend saving 1 to 4% of your home’s value to cover any emergency costs that arise.
If you have an expensive repair or you’re planning a remodeling project, here are some other options available that will ultimately depend on your financial situation:
Home equity loan or home equity line of credit
Both of these are widely available from banks or credit unions and allow you to borrow against the appraised value of your home. With a home equity loan, you take out a lump sum and then make fixed payments. A home equity line of credit gives you a revolving line of credit, which could give you more flexibility. Both typically come with lower interest rates compared to traditional loans, and offer tax benefits, but require you to put up your home as collateral.
Personal loans
You could also apply for a personal loan from a bank or credit union. The interest rates on personal loans are still typically lower than the interest rates on credit cards. You’ll also have a set repayment timeline, so you’ll know exactly when you’ll be debt-free.
What about credit cards?
Most finance experts recommend you think twice before reaching for one of these to cover an emergency repair. This is because credit cards come with the highest interest rates, and carrying too high of a credit card balance can damage your credit score.
Have a question for Jeff Rossen? He’s answering your consumer questions every Friday in the new segment “Rossen Responds.” Email your questions to him at RossenResponds@hearst.com.
