True or False: A line of credit is a good emergency fund
Originally published in Neo’s The Get on January 10, 2026
You know you need an emergency fund. But when money’s tight, just keeping up with everyday bills can feel like a stretch. Some of your friends might recommend using a line of credit as an emergency fund, but is this a good idea?
Short answer: Yes (and no). Advice-only financial planner and podcaster Sandi Martin says, “If your line of credit is your only way to stay housed and fed, use it. Otherwise, no.”
So, what should you do to prepare for an unexpected expense when money is tight? Let’s dig into the details of what makes a good emergency fund and what you want to avoid.
What’s an emergency fund?
Life is unpredictable. An emergency fund is money set aside to cover unexpected expenses, like a car repair, job loss, or a new furnace. Ever notice how these things often happen in the middle of winter?
Martin believes everyone needs an emergency fund. “Emergencies don’t care if you have a great income, good insurance or a big investment account,” she says, adding that sudden costs “can happen to anyone, at any time.”
As a general rule, it’s recommended to save three to six months (or more) of expenses. The goal is to cover your minimum costs, things like rent, utilities, gas and groceries—not discretionary expenses like subscriptions and new clothes.
How an emergency line of credit can become costly
“Many people don’t realize that a line of credit is a demand loan with a variable interest rate,” Martin explains. A demand loan means your lender has the right to reduce your credit limit or require repayment. A variable interest rate means your rate can rise or fall unexpectedly. Check the terms of your line of credit to understand how you might be impacted by both.