How to cope with unexpected bills

Coping with unexpected billsPic: Getty

The continuing economic downturn has caused most Brits to watch what they're spending, but even if you are on top of your finances, an unexpected bill can quickly lead to money worries.

Whether it's a car breakdown, faulty boiler or poorly pet, here are some ideas of how to cope when a hefty bill unexpectedly lands on your doormat.

Raid your savings
If you are lucky enough to have a little emergency cash squirreled away for a rainy day, now is the time to use it. Withdraw some of your savings and you will lose interest, yes, but the amount lost is likely to be a good deal smaller than what you would pay if you borrowed the cash.

Do, however, check whether you will be penalised for withdrawing money, which is often the case with regular saver accounts or cash ISAs, though some easy access ISAs allow a certain number of withdrawals each year. Even if you do face a penalty charge, it's worth comparing the cost against the interest you might have to pay if you borrowed the necessary funds - it could still be the best option.

Borrow the cash
For those without savings but with a credit rating to be proud of, borrowing is always an option. If you have time to organise this option, it may be wise to look for a credit card offering zero per cent on purchases for an introductory period, which will give you some breathing space to pay off the bill in time.

Where you are pressed for time to pay your unexpected expense, extending or applying for an overdraft could be the answer. Many banks will allow you to increase your overdraft limit and the change will often be applied over a 24 hour period, giving you the money to pay within a day or two. Some accounts do charge a fee, and you will almost certainly be charged interest on your borrowing though, so do make a plan to repay what you borrow rather than staying in the red.

Alternatively, consider asking a close friend or family member to help. As long as you stick by your commitment to repay them, it could save you a bundle in fees and interest.

Take a break
If your unexpected bill isn't a huge amount, taking a payment holiday from a regular monthly payment could allow you to cover the cost without borrowing further, so it's worth checking with your creditors whether it's possible.

Personal loans and even mortgage payments could be temporarily put on hold for a month while you deal with your emergency, particularly if you have been making payments for some time or have made overpayments on your mortgage. Just be aware that you will be charged interest throughout your payment holiday, and you may also incur a fee for the privilege.

Cut back
Where an unexpected expense isn't an emergency, cutting back on other bills and non-essentials is the key to covering the cost. Making simple changes such as doing without that skinny latte on the way to work, or ditching the all singing, all dancing TV package could allow you to save the required cash reasonably quickly, so go through your monthly expenses with a fine toothcomb and see where you could save. To help you do this, it is worth visiting the Government's Money Advice Service website, where you'll find a 'cut back calculator' to give you a quick and easy way to save money day to day.

Have you been faced with an unexpected expense? How did you deal with the problem? Leave your comments below...