5 Ways to Raise Cash Quickly

Even before the pandemic, a Federal Reserve study found that 4 out of 10 Americans would have trouble covering a $400 emergency expense.

These days, many households are facing a financial emergency. The federal stimulus check — typically $1,200 per adult plus $500 for most children, depending on salary and most recent tax return — will help, but the last of the paper checks won't go out until September. If you need to raise cash before then, here are some options.

Home equity line of credit. If you own your home, you can borrow against the equity in your house using a home equity line of credit, or HELOC. You'll get a credit limit that you can tap when needed and pay interest on the amount you borrow at a rate that's often lower than other loans. Typically, in the first 10 years, you will pay only interest or a minimum amount of interest and principal. After that, the debt and interest can be repaid over 10 or 20 years.

Life insurance. Permanent life insurance has a cash value component, essentially a savings account that is funded by some of your premiums. You can withdraw the cash value — up to the amount of premiums paid — tax-free. However, this will lower your death benefit.

Or you can borrow from your insurer using the policy as collateral. You'll be charged interest, say, 6% to 8%, which can be added to your loan balance. If you don't repay the loan in full, your death benefit will be reduced.

No-interest credit cards. Racking up debt on credit cards is rightly discouraged, but some 0% interest card promotions can be a short-term solution for the cash strapped. Some cards charge no interest on new purchases or balance transfers for 12 to 21 months. (These deals typically go to consumers with good credit scores.)

Make sure to pay off the balance before the promotional offer expires. After that, interest can accrue on any balance at an annualized rate of 13.7% to nearly 24%, according to Bankrate.com.

Family loan. Many younger workers turn to the Bank of Mom and Dad in money emergencies. When borrowing from relatives, make the loan as business-like as possible for family harmony. Write down the terms — such as when the loan will be repaid and what interest will be charged — to prevent disputes later.

Retirement accounts. You have always been able to withdraw your contributions — but not earnings — to a Roth IRA at any time without taxes or penalties. While pulling money out of retirement accounts should be a last resort, the Coronavirus Aid, Relief, and Economic Security (CARES) Act now allows penalty-free coronavirus-related distributions (CRDs) of up to $100,000 from IRAs this year for those affected by COVID-19. Taxes on distributions can be spread out over three years. And withdrawals may be repaid within three years.

Note: If CRDs are made available by your employer in 457(b), 401(a), 401(k), and 403(b) plans, you may be able to access your vested account balance up to $100,000 across all plans. Employers may set lower withdrawal limits so participants can take assets out of their retirement savings over time to prevent taking more than is needed to cover expenses.