It’s not really an “if” whether or not financial problems will eventually find you – almost everyone is going to be in financial straits at some point in his or life, and probably at multiple points. But knowing how to get through tough times is the key to surviving and rising to see a better day.
Managing your budget, limiting expenses, and finding new sources of income may be a part of the solution. And, in time, if you take the right steps, things are likely to turn around. But in the meantime, you may need to consider taking out a loan to get you through.
What, then, are your best financing options? For many, a traditional bank loan is seldom a practical answer, when it comes to struggling with personal finances during a financial rough spot in life. But here are 4 of the most common ways people weather the storm:
1. Borrowing From Friends
Borrowing money from family or friends isn’t easy, in the sense that you feel embarrassed to ask. But, the fact is, loved ones will often come to your aid if they see you in a legitimate pickle.
And many times, a loan from friends/family is interest free or at least very low interest. And your chances of getting “approved” for the loan are much higher than with a bank – plus, if you need extra time to make a payment, there are no late fees to worry about.
2. Fast-cash Loans
You may have heard that paycheck advancements are an expensive choice, along with all other fast cash loans. But they often have lower interest than credit cards, depending on your credit score – and you can usually get approved for them even with bad credit.
Plus, payday loans, no-collateral personal loans, and title loans give you access to the cash you need within a few business days (often within a single business day.) In a financial crunch, timing is obviously very important.
In fact, if you fall behind on house and car payments and suffer overdraft fees at the bank, you could end up paying more than if you had just taken out a fast-cash loan and repay it on time.
3. Pawn Shop Loans
Another option is to get a loan from a pawn shop, using some pawn-able item as collateral. If you have expensive jewelry, collectible coins, antiques, high-priced electronics, and other suitable items on hand, this is a viable option.
It’s true that pawn shop loans have high interest rates and that you risk losing your collateral goods, but on the other hand, the worst that can happen is you lose your collateral. There are no debt collectors to worry about. And if you pay the loan off in time, you’ll get your valuables back anyway.
4. Credit Cards
Credit cards are a fast, convenient way to take care of emergency expenses. If your card(s) are not already loaded up and you have sufficient credit line, credit cards might be a good short term financing strategy.
If you can get approved for a new card with a no-interest intro period or other “perks,” all the better. In fact, with a cash back scheme in place, it’s even possible you could end up making money off using the card and paying no interest at all.
On the other hand, whether or not credit cards are superior to other short term loan options depends on the APR and on how fast you can pay the card off. Don’t get stuck in the “credit card trap.”
Aside from applying for a traditional bank loan, which will take more time and require better credit, these 4 are often the main options when you hit hard times. Which ones are available or are best will vary from situation to situation, but be sure to consider all 4 and to make an informed decision on your next loan.