The best ways to raise cash fast

If they're receptive, though, you can:

• Ask for a gift. Anyone can give anyone else up to $12,000 a year without having to file a gift-tax return. The recipient doesn't have to pay taxes on the money, either. So if you have a family of four, your parents potentially could transfer up to $96,000 a year ($12,000 times two parents times the four of you). Using the so-called "annual gift exclusion" is a part of estate planning for many wealthy families, because such transfers can help rich parents reduce the holdings that might otherwise incur estate taxes after their deaths. But estate taxes will be a concern only if your parents are well off. Currently, estate taxes don't apply until the estate is larger than $2 million.

• Ask them to pay a medical or tuition bill. You can get around the $12,000 limit if your parents pay certain bills directly. The unlimited exclusion applies to medical bills and tuition for you or your family. But the payment must be sent directly to the medical provider or school -- if the money's in your hands, however briefly, the $12,000 limit still applies. Talk to a tax pro for details.

• Ask for a loan. Your parents can loan you money and charge you a below-market interest rate, as long as the rate isn't too low, said Doris Merrick, tax director at Brinton Eaton Wealth Advisors, a financial planning firm in Madison, N.J.

To avoid IRS wrath, the rate your parents charge can't be lower than the IRS' Applicable Federal Rate for the month in which your parents make the loan, Merrick said. For loans made in January 2009, the annual Applicable Federal Rate was:

• 0.81% for loans lasting up to three years.

• 2.06% for loans of three to nine years.

• 3.57% for loans over nine years.

Your parents also should draw up proper loan documents that both of you sign and, if the loan is for a home, have the mortgage recorded with your county. Your tax pro has details, and you may want to use a site such as VirginMoney to handle the payment details. (For more details, see "How to loan money to family.")

If none of the options so far will work, your next choice may be to:

Borrow smart

If you must borrow from someone other than your folks, aim to keep the interest rate low, the payments manageable and -- if possible -- the debt as short-lived as possible. Some options:

• Tap home equity. Lenders are freezing or lowering limits on home equity lines of credit in many areas of the country. If you still have access to yours, though, or have enough equity in your home to entice a lender, HELOCs can be a low-cost source of emergency cash. Borrowers with the best credit can get variable interest rates lower than the prime rate. For the first 10 years of a HELOC, you pay only interest, although you can pay down the principle you owe at any time. Another option is a home equity loan, which is an installment loan that comes with fixed payments and a fixed rate. The current average is just under 8%.

• Reverse mortgage. If you're 62 or older and have substantial equity in your home, you probably can access it through a reverse mortgage. You can get a lump sum, a stream of monthly payments or a line of credit you can tap at will, and the loan doesn't have to be repaid until you move, sell or die. For more information, check out this AARP tutorial or real-estate writer Tom Kelly's book, "The New Reverse Mortgage Formula: How to Convert Home Equity into Tax-Free Income."

• Hit up friends or other family. If your parents don't have cash to lend, maybe your friends or your rich Aunt Tildy can help out. There are plenty of risks for them and for you, of course. Read "Lending to a friend? Look out" for details.

• Consider a social lending site. Sites like Prosper and Lending Club tap of community of borrowers willing to lend money to strangers. Borrowers with the best credit can get personal loans with rates below 9%. As with most other loans, rates are higher the worse your credit.

• Talk to your credit union or bank about a personal loan. Interest rates for people with good credit are around 15%; you may be able to get a slightly better rate from a member-owned credit union. For more, read "Ditch your bank for a credit union."

Continued: Borrow from (but don't cash out) your 401(k)

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