8 Frightening Financial Emergencies (And How to Deal with Them)

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Even the most dedicated penny pincher can run into financial difficulty at one time or another. Whether it’s an unexpected expense or a sudden job loss, with some forethought and the right planning, you can survive a financial emergency with your mental well being and bank account intact. 

Frightening financial emergencies

Here’s an example of some of the financial emergencies you may encounter.

1. Unexpected home repairs

For most Canadians, a home is their most valuable asset, so it’s wise to make protecting it one of your top priorities. Unfortunately, unexpected home repairs — like a flooded basement or a new roof — can also be some of the costliest emergency expenses. While there is no hard and fast rule, some experts suggest that homeowners should plan to put aside anywhere from 3% to 5% of their home’s value to cover maintenance costs.

2. Unexpected car repairs

Car repairs are another urgent expense that can be very costly. You’ll also need to consider the added expense if your car breaks break down unexpectedly while you’re away from home, which could mean a large towing bill. And don’t forget transit costs; if it takes a few days to fix your vehicle, you’ll have to factor in the cost of public transit or a taxi.

3. Unexpected tax bill

Even at the best of times, no one looks forward to tax time. Things get even worse if you get an unexpected — and very unwelcome — income tax bill from the CRA. Worst yet, you might even be liable for penalty fees and interest charges if your payment is late.

4. Large veterinary bill

It may surprise a pet lover to know that the average annual cost of pet care in Canada is about $650 — and that’s just for the basics. If your fur friend has an accident or develops a serious or chronic medical condition, the costs rise exponentially and could put you out thousands of dollars. No pet owner wants to ever face the choice of providing medical care for their animal companion or having to put them down.

If your pet requires emergency veterinary care that you can’t cover right away, there are borrowing options to consider. Read our blog article on how to budget for pet expenses and learn what to do if you get a vet bill you can’t afford.

5. Medical or dental emergency

While Canadians are lucky to have universal health care, there are many costs that aren’t covered by the government, such as physiotherapy, prescription medication, eye care and dental cares. For example, depending on where you live, if you have to visit the dentist for a crown or root canal, you can expect to pay a minimum of one thousand dollars for treatment.

6. Unexpected job loss or income decrease

There are few unexpected life events that people dread as much as losing their job. No matter how diligent of an employee you are, the economy is unpredictable and companies are forced to let staff go during economic downturns. Unless you have a large emergency fund set aside, losing your main source of income could significantly impact you and your family’s budget and lifestyle.

7. Unexpected travel

If a loved one gets ill or passes away in another province or country, you may have to suddenly come up with funds to travel. Not only do you need to consider the cost of the travel itself, but if you don’t have holidays saved up, you may also need additional funds to compensate for lost income while you’re away.

8. Unplanned life events like a divorce or death 

Nobody likes to think about death or divorce, but they are common life events that can empty out a savings account. In the event of a death, funeral costs alone can put a huge dent in your bank account, especially if the deceased didn’t have life insurance. In the case of divorce, if kids are involved and lawyers are needed to work out the division of assets and custody agreements, the expenses can add up for months or even years.  

How to deal with a financial emergency

Evaluate the situation

The most important thing to do is not to panic. While the situation may feel catastrophic, there’s usually things that can be done to ease financial stress. First, determine how much money you need and the various options you have at your disposal to mitigate a financial crisis. It’s also essential to spend some time figuring out what caused the financial shortfall. It may be something outside of your control like being laid off from your job. On the other hand, an honest assessment of your situation could highlight room for improvement and give rise to preventative solutions — like saving up an emergency fund or curbing overspending — that will ensure you can handle the next unexpected expense.

Prioritize expenses

Not all expenses have the same importance. Be careful to distinguish needs (housing and food) versus wants (restaurant meals and entertainment) and focus on cutting back where possible. Creating a budget with well-defined spending priorities will keep your spending on track.

Communicate with your lenders 

Don’t be afraid to reach out to any creditors you currently owe money to like a lender or credit card company. They may be willing to negotiate payments until you can get back on your feet. Believe it or not, there are many creditors who would rather temporarily accept smaller payments than have to go through the bother and lost profits of sending your account to a collection agency.

Access savings or find extra money

Ideally, you want to have money set aside in an emergency fund to help pay for unexpected expenses, but if you don’t have extra money available in your budget, you may need to borrow money. Your options may include:

• Asking for help from family or friends. Keep in mind that even when you borrow money from a friend or family member, to protect your relationships it’s important to keep things as professional as possible. This means having a written document stating what you owe, if interest will be charged and a repayment plan.

• Withdraw money from other savings or investments. Generally, it’s not recommended that you withdraw funds from things like an RRSP or a retirement savings account as its important to safeguard those funds.

Credit card 

Charging an unexpected expense to your credit card can be a quick solution when in a pinch, but it’s risky if you can’t pay the balance off right away for two main reasons. Firstly, credit cards charge a high interest rate and therefore unpaid balances can quickly lead to ballooning debt. Secondly, credit card companies usually report any missed payments to Canada’s credit bureaus. As payment history is the single most important factor making up your credit score, just a few missed payments can cause a big decrease in your score. 

Emergency loan

Another option is an emergency personal loan. You’ll  have the option of taking out a secured personal loan (you provide an asset as collateral and thus access better rates) or an unsecured personal loan (no collateral but often faster to process).

Since the application process for an unsecured personal loan is faster, you could have access to funds the same day you apply, making it a good option for covering an urgent or unexpected expense.

What are emergency loans and how can you get one?

Emergency loans (aka personal loans) are designed to help you get through a time of financial uncertainty often caused by something like a job loss or a large, unexpected expense like a home repair. Depending on which lender you choose, personal loans feature many potential benefits, including:

• Flexible repayment terms: Loan terms can range anywhere from six months to 120 months, depending on the type of loan you get.  

• Fixed interest rate: Unlike other credit products, such as lines of credit that come with variable rates of interest that can change at any time, personal loans usually feature fixed rates, so you don’t have to worry about your interest payments increasing unexpectedly.

• Affordable monthly payments: With the right loan you can enjoy affordable payments that fit with your budget. 

• Structured payment schedule: With a personal loan (also called an installment loan) you’ll repay the funds over a set period of time through a pre-determined number of monthly payments, called installments.

How can you get a loan?

Traditional banks or online lenders offer a variety of loans. However, be sure to do your research, especially when searching for an online lender. Online loan scams are on the rise in Canada and it’s essential to ensure the lender is reputable.

One reputable Canadian lender offering emergency personal loans is Fairstone. With almost 100 years of lending experience in Canada, Fairstone offers quick emergency loans from $500 to $25,000 for a range of urgent expenses. You can apply easily online and at 240+ branches across Canada.

Fairstone is available to approve loans every day of the week in most provinces and territories, even on Saturday and Sunday. When you complete the loan application online, you could have your money by Monday morning.

Bottom Line

A financial emergency can happen to even the most scrupulous savers. There are a variety of ways to access fast funding, so take the time to figure out which one works for you. If going with a personal loan is your best option, ensure you choose a reputable lender you can trust.

How to manage unexpected expenses with an emergency loan from Fairstone

• Get a loan quote – no obligation, no impact to your credit score

• Find out how much money you could qualify for in minutes

• Finalize your loan application online or at a branch

• Have your emergency loan deposited directly into your bank account in as little as 24 hours.