Stimulus Check Isn't Enough? Here Are Five Ways to Come Up With Extra Cash

As the financial impact of the coronavirus pandemic deepens, tens of millions of Americans are having trouble making ends meet and need access to cash, fast, to pay their bills. And their numbers are growing daily. By late April, half of Americans had lost a job, had their work hours reduced or were living with someone who had, up from 18 percent in March, according to an NPR/PBS/Marist poll. And nearly 4 million more workers applied for unemployment benefits for the week ending April 24, bringing the most recent six-week total to a record 30.3 million.

Relief efforts have helped—from stimulus checks and beefed-up unemployment insurance to breaks on student loan payments and other bills—but not nearly enough for a lot of families. Reports show that many are already behind on rent, mortgage and credit card payments. Meanwhile, about one-third of Americans say they're now unable to pay all of their current bills in full, according to a Pew Research survey.

In a perfect world, if your income no longer stretches to cover your living expenses, you'd just dip into your emergency fund to tide you over. But this is the real world, and in the real world years of rising costs (from health care to education and everything in between) have made it difficult to save the minimum three months' worth of living expenses that financial advisors recommend. Pew found that nearly half of Americans fall short of that benchmark, including 77 percent of lower-income families and one in four upper-income households.

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If belt-tightening and the temporary breaks on bills that some companies are offering isn't enough to tide you over, where can you turn for extra cash until your income and the economy bounce back? While none of the options for fast cash are great—no free lunch and all that; borrowing always comes at a cost—some are more awful than others (looking at you, payday loans). Here are a handful of better choices, who they're most suited to and how best to make them work for your needs.

Tap the Equity In Your House

Homeowner equity was rising before the coronavirus struck, which means that if you've owned your place for a while, you may be able to borrow against it to help pay your bills.

In the best-case scenario, you already have an open home equity line of credit, commonly called a HELOC, that you can draw on as needed. "There are no tax disadvantages, the rates are low, and you can generally pay it back when you have the cash flow to do so," says Baltimore-based certified financial planner Brent Weiss. As of April 30, HELOC rates nationwide averaged 4.87 percent, with some lenders offering lines below 4 percent for the most creditworthy borrowers.

If you don't already have a HELOC in place, though, you could be out of luck. Lenders probably won't be keen to offer a new line of credit if you've lost all or part of your income or you've fallen behind on bills. In fact, with the economy in distress, many banks are reluctant to lend to homeowners under any circumstances: J.P. Morgan Chase recently paused new applications for HELOCs and other lenders are expected to follow suit.

For homeowners 62 and older, there may be another option: a reverse mortgage, which also allows you to draw on your equity for income in the form of a line of credit. You don't have to repay the loan as long as you live in your home and keep up with your property taxes. Instead, the debt is repaid when your home is sold.

The advantage to this approach is that you can avoid tapping retirement savings for funds at a time when stock prices are down, which would lock in current losses, or taking Social Security early, which typically permanently reduces your benefits. But there are drawbacks too: A reverse mortgage can be expensive, with additional fees that you don't usually have with a traditional HELOC, and the rules can be complicated. Plus, if you were counting on the proceeds from the sale of your home at a later date to help fund your retirement or leave a nice inheritance for the kids, you could be out of luck.

For that reason, Weiss recommends considering a reverse mortgage with extreme caution. "It may relieve the hardship in the short-term, but this can have major adverse consequences years down the road when it matters the most," he says.

Use Credit Cards Smartly

Taking on credit card debt is a permanent feature of the certified financial planner no-no list. But in tough times like now, when you need the money, you need the money. And for the almost 170 million Americans who have at least one credit card, it's probably the easiest and fastest way to get your hands on extra cash or funds to cover your bills.

But it's potentially a very expensive form of help.

If you charge living expenses to the card and carry a balance, you'll pay, on average, a 17% interest rate on that debt, according to the Federal Reserve. If you instead, get a cash advance, the rates are even worse, often a full 10 points higher. Plus, you'll typically pay an additional fee, most commonly $10 or 5 percent of the amount you're borrowing (whichever is higher) and interest begins building up immediately (there's no grace period, as with regular charges).

A better option, if you can manage it, is to charge what you must to a credit card with a long zero percent financing period on purchases, hopefully one lasting 12 months or more. Look to see if any of your current cards offer that option, since it will be tough to qualify for a new card now. If none do, contact your lender to see if they are "willing to work with you to either skip a payment or lower the interest rate," says certified financial planner Bobbi Rebell, host of the Financial Grown-Up podcast. (Nine out of 10 credit cardholders who've asked for a break on their bills due to the COVID-19 outbreak have gotten one, according to a recent Lending Tree survey.)

Then, plan on prioritizing paying off this debt when you get back on your feet to avoid high interest kicking in after the zero-percent financing period expires.

Sell some investments

If you own stocks, bonds or mutuals funds in a regular, taxable account, versus a 401(k) or a similar retirement plan with tax breaks, you may be reluctant to sell now when your balance is probably way down. That's sound thinking, usually, because selling locks in your losses, robbing you of time to recoup. But if you need money, selling at a loss can be a better option that going deeply into debt.

Despite the market's recent collapse, there's a good chance you will owe capital gains taxes if you've owned the investment for more than a year. The stock market rose nearly 30 percent last year and is up solidly over the past three. Still, long-term capital gain tax rates are lower than ordinary income tax rates, which is typically what you'll pay if you sell investments from a retirement account. Bottom line, says San Francisco-based certified financial Susan Behr: "Don't fret about the taxes if you need the money."

To minimize the hit, Behr recommends that you first sell any bond investments in your account, which have generally gained less in value than stocks. "There's less tax liability from selling your fixed income assets as you've already paid tax on interest and dividend distributions and the underlying asset hasn't had as much gain or loss," she says.

Break Gently Into Retirement Savings

Accessing your retirement funds before you actually retire is almost as big a heresy as taking on credit card debt, according to financial advisors. Not only are you giving up the opportunity to recoup recent losses in your account but you're giving up the chance at future gains and gains on those gains—a phenomenon known as compounding that's like an application of Miracle-Gro on your savings.

Still, apart from your home if you own one, a company-sponsored retirement account is the biggest pile of cash many people have access to. Even with the market's recent slide, the average 401(k) balance at Fidelity Investments, one of the country's biggest company retirement account providers, is $91,400. That's down from $112,300 at the end of last year but it's still a good chunk of change.

If you're still working but are struggling because your hours have been reduced or your spouse is out of work, you can avoid permanent damage to your retirement account by borrowing against it instead of making an outright withdrawal. The recent $2.2 trillion relief bill from the federal government increased the amount you're allowed to take (up to $100,000) and provided an extra year to pay it back (up to six). Another plus: Interest rates tend to be low compared to other loans and you're paying back the money to yourself.

The drawback, in addition to potentially sacrificing some future growth on your savings is that, if you lose your job and have an outstanding loan, you'll typically have to pay it back within a few months, or owe income taxes and, under ordinary circumstances, a 10 percent penalty. So, you only want to go this route if you're reasonably sure your job is steady, to the extent anyone can be these days.

Alternatively, you can withdraw money outright. The relief bill also made it easier to do this if you're under 55 and you've lost work because of the economic fallout by waiving the typical 10 percent penalty and giving people three years to pay the money back or settle up with the IRS.

As with a loan, though, you're essentially selling low, even if you eventually replace the funds you take out. despite the recent bear market, the S&P has delivered an annualized gains of 7% over three years, according to Morningstar. Imagine what kind of growth you might see once the economy recovers. So, if at all possible, resolve to actually repay any funds you withdraw.

Retire Early—and Then Maybe Take It Back

Delay claiming Social Security as long as you possibly can is a mantra among financial advisors. Although you can take benefits as early as age 62, every year you wait increases the amount you'll eventually get, up to age 70. Since Social Security is the most important source of income for most retired Americans, waiting to claim makes a lot of sense.

Still, while half of workers plan to work until 65, more than a third end up retiring before they want to, according to Boston College's Center for Retirement Research, often because of health issues or poor job prospects. Given the global pandemic that's devastated the economy, and that the virus disproportionately affects people over 60, those factors may push more older people to claim Social Security early.

Of all the ways to get money to help get you through the current hard times, though, claiming Social Security earlier than you planned has the potential to do the greatest long-term damage to your finances.

It's a decision that's difficult, though not impossible, to reverse. You can, for example, withdraw your application if you find a new job within a year of claiming. The catch: You'll have to repay the benefits you received.

Once you reach full retirement age—between 66 and 67 currently, depending on when you were born—you can also suspend your benefits, which would enable them to resume growing up to age 70. Whether you'll be able to find a job then or your health will permit working are open questions, though, making this a shaky strategy to count on.

That's why financial planners like Rebell recommend only filing early if you've exhausted all of your other options.

Taylor Tepper is a senior writer at Wirecutter Money and a former staff writer at Money magazine. His work has additionally been published in Fortune, NPR and Bloomberg. You can find him on LinkedIn, Twitter, and Instagram.