Over the past few years, a lot of people have seen their lives disrupted. Many may have financial needs they hadn’t planned for. On top of that, the cost of borrowing is on the rise. So what are some smart ways for clients to access emergency cash without paying the 11% average interest rate on personal bank loans or 20% that credit cards now demand?

Explore Your Options
“The first question is, how much cash is needed and how long is the cash needed?” says Dustin Gale, a senior wealth advisor at Kayne Anderson Rudnick in Los Angeles.

If the need is immediate and short-term, and the client has an investment account, Gale suggests a securities-backed line of credit. “A margin line or portfolio-secured line of credit against a taxable account may provide the quickest and easiest solution at competitive rates,” he said.

These credit lines generally let you borrow up to 95% of the value of the assets. You must make monthly payments, though, and if the value of the collateral portfolio happens to fall below the outstanding balance, you may be required to pay back the full balance immediately.

“As always, make sure to understand the details and risks, and be sure to shop around,” said Gale.

Tapping Home Equity
Another option is borrowing against your home equity. This may take several forms. There are straightforward home equity loans, home equity lines of credit (HELOC), and reverse mortgages.

“A home equity loan is basically another mortgage,” says Chris Briscoe, vice president and wealth advisor at Girard, a Univest Wealth division, in King of Prussia, Pa. “The amount you’re allowed to borrow depends on the value of your home and how much you already owe on it.” Payments are at a fixed interest rate for the term of the loan, frequently lower than a consumer loan since home equity is good collateral. But there are closing costs, and if the cash is needed in a hurry this may not be the answer.

A HELOC, on the other hand, allows you to borrow on an ongoing basis, like a credit card. But the interest rate is variable—which means, in this environment, your payments are likely to rise.

The third option, a reverse mortgage, is primarily for “those in the decumulation stage of their retirement planning,” said Jason Miller, a partner at Crewe Advisors in Scottsdale, Ariz. You don’t have to make regular payments, but the entire amount is due when you move out, sell the home, or die.

Federal regulations have made reverse mortgages safer than they used to be. For instance, the loan amount can’t exceed the home’s market value. If the home’s value dips too low, the lender’s insurance will cover the difference, so the borrowers (or their heirs) aren’t responsible for it.

“There is research that indicates that, in some cases, drawing from an alternative liquidity source [such as a reverse mortgage] instead of from portfolios during down markets may help protect the sustainability of portfolios over the course of retirement,” said Miller.

Still, reverse mortgages are complex. “Fees can cut significantly into the hoped-for cash flow,” cautioned Kimberly Foss, founder and president of Empyrion Wealth Management in Roseville, Calif. She judges reverse mortgages a “final option, rather than a first recourse.”

Of course, the biggest danger with all these home equity options is that, if you default, the lender can take away your home.

Life Insurance
If that thought makes you too queasy, consider the cash value of your permanent (whole or universal) life insurance. (Term insurance doesn’t have cash value.)

“Cash-value insurance can be a very powerful vehicle to utilize,” said Tom Henske, financial advisor at The Affluent Insurance Advisor in New York City. “During volatile markets, retirees with a healthy amount of cash value in their whole life policies might choose to draw from this account while their equity accounts are temporarily down, allowing these equity accounts to remain undisturbed until such time as the markets stabilize.”

There are several ways to access the cash value. Depending on the policy, you may be able to get a low-interest loan against it or take a straightforward withdrawal from it, which is really an advance on the death benefit. The latter normally doesn’t have to be paid back and is tax-free up to the amount of the premiums paid into the policy.

Either way, the policy will have less value until the money is repaid. Then again, if you no longer care about the policy, you can always “surrender the policy for its cash value,” said Foss.

Annuities
Some annuities have cash value, too. But there are likely to be surrender charges for early distributions. “Early” is often as long as 10 years after the annuity contract is executed. “During that period, some contracts allow an investor to access up to 10%  of the contract value,” said John McCafferty, director of financial planning at Edelman Financial Engines in Alexandria, Va.

But, he cautioned, “this tends to be a less tax-friendly strategy.” Loans taken from annuity contracts are deemed distributions and are therefore taxable.

If it’s a qualified account, you can’t withdraw funds before you’re age 59-and-a-half without incurring an additional 10% penalty—on top of the income tax due.

There may also be fees and other consequences triggered by withdrawal. Foss at Empyrion Wealth Management said it might be better to simply annuitize the contract completely.

Borrowing From A 401(k)
For some, leveraging a retirement account makes the most sense.

“Investors with a 401(k) may be able to take a loan of up to $50,000, depending on their account value,” said Kristin McKenna, a managing director at Darrow Wealth Management in Boston. In most cases, the limit is $50,000 or 50% of the assets, whichever is less.

The interest will be low, without a credit check. After all, you’re effectively borrowing from yourself. But removing money from retirement savings can have a ripple effect. Those funds will no longer be invested, and some plans won’t allow any additional investments until the loan is paid back. What’s more, if you leave or lose the job, the balance may be due immediately.

Taking Early Withdrawals From Retirement Accounts
Instead of a loan, consider an advance from a qualified retirement plan. If you’re not yet 59 and a half, taking money out will usually trigger a 10% penalty. But not always.

“There is a useful exception,” said Daniel V. Hawley, founder of Hawley Advisors in Walnut Creek, Calif.

Called a Substantially Equal Periodic Payment (SEPP), it allows annual distributions, calculated according to an IRS formula, for five years or until you turn 59-and-a-half, whichever comes later, without the 10% penalty. Income tax will be due, however, and if you cancel the plan before it concludes you have to pay all the penalties you otherwise avoided, plus interest.

Nice as it may seem, a SEPP isn’t right for everybody. “A better option is to build up cash reserves by stopping retirement plan contributions during a period of temporary crisis,” said Hawley.

Preston Forman, a certified financial planner and senior partner at Seasons of Advice Wealth Management in New York, said he “gently begs” clients not to tap IRAs or 401(k). In his experience, borrowed retirement funds are rarely paid back. “It should be your last choice,” he stressed. “I’m a purist. Retirement money is for retirement. Something always comes up and years of highly compounded money evaporates.”