While your family lender doesn't have to charge the full market interest rate, they have to charge you something for the transaction to be considered a loan and not a gift that could have tax and estate planning implications. The government publishes a monthly list of applicable federal rates, or AFRs, that provide minimum interest rates on loans made between family and friends. If your loved ones aren't in the black right now, peer-to-peer lending sites can connect you with wealthy strangers.
In gravely disastrous times, Uncle Sam might also help.
"If someone gets their house run over by a hurricane, they might be eligible for assistance from FEMA," says Casey Weade, vice president and CFP with Howard Bailey Financial, a consulting firm in Fort Wayne, Ind.
According to the agency's website, the Federal Emergency Management Agency provides disaster assistance for temporary housing, home repair, disaster-related medical and burial expenses, vehicle damage and cleanup costs, while the U.S. Small Business Administration offers federally subsidized loans for home and business owners. To qualify for either, borrowers must live in a FEMA-declared disaster zone and file a claim with their homeowners insurance first.
Permanent life insurance policies are excellent emergency resources because they're accessible, you can borrow against them without having to qualify for a loan, and you can pay a policy loan back on your own schedule.
"You can borrow up to about 90 percent of the cash value of the policy. There are no immediate income tax consequences unless the loan isn't repaid," says Roland Jones, a CFP with Moneta Group, a financial services firm in Clayton, Mo.
Though rules vary among insurance providers, many require policyholders to own their policies for a few years before borrowing. You'll also be charged interest for taking out a policy loan, which will be deducted from the death benefit until you pay the loan back, reports the New York State Insurance Department.
Just don't borrow too much. Should the loan and accumulated interest become greater than the surrender value of the policy, policyholders could find themselves having to pay significant premiums to keep the policy in force. Variable policy owners should exercise extra caution, Jones says, since the stability of their policy is contingent on market performance. Borrow too much, and one market dip could put your policy underwater.