Examine Each and Every Option
Even if you’re desperate, you shouldn’t rush into a loan without having compared the various loan broker’s costs and payback times. Making this comparison will save you money and help you find a payment plan that fits your budget.
You should consider both online loans and those offered by stores or banks. The research will take time and possibly require you to travel from store to bank and back, but the potential savings are worth it.
Prepare for a rainy day by doing this research now, before you need to apply for a loan.
Ask a Family Member or Trusted Friend
As they say, blood is thicker than water. In many cases, when it is vital, your family and friends will be there for you through thick and thin. Depending on your needs and relationship with them, you may be able to avoid an official loan broker.
How Should You Ask?
If you’ve decided to speak to your friends or family about borrowing money from them, you don’t want to rush in and outright ask or beg for it. Here are a few pointers that’ll get the best result.
Take a look at your finances and organize them. If you can show that you’ll be able to repay the money to your friends or family, your chance of getting it increases tremendously. By assessing your average spending and how much you have left after that, you’ll come to a rough estimate of what you can afford to pay back. You can maximize this by looking at the products you can go without for a while and save money by not buying those.
Speak to the people that trust you instead of wasting your time on others who won’t hold faith in you. You can show off a budget when attempting to convince your potential saviors, but it’s meaningless if you’re consulting someone already insecure about their finances.
Clearly explain the story of why you need the loan, but don’t make it sound too emotional. Often people use their emotions to guilt-trip others, which is why telling a sad story will often push others away.
Calculate the exact amount you need. If you can’t get the precise amount you need, try to ask for part of the amount. Don’t ask for too little, as returning to request another loan creates the idea that you are irresponsible.
Now you’re at the most crucial part of asking, telling your family, or friends what they will receive if they help you. You can organize a payment schedule, offer to pay interest, and set up consequences for failure to repay the loan.
If someone you know loans you the much-needed cash, you should keep them informed about how well you’re earning the funds back.
Ask Someone to Co-sign
If your family or friends aren’t willing to loan you money themselves, try asking for someone with a good credit score to sign a loan agreement with you. Their signature will place them at financial risk should you fail to pay the loan back.
There is a benefit to this as a few loans will have decreased interest rates when your agreement is co-signed. Due to the nature of the loan, once it is repaid, you'll improve your own credit score.
Consult with friends or family members that trust you and can see that you’ll be able to repay your loan without their interference. As mentioned above, anyone that isn’t certain about their own finances should not be asked. For the best result, seek someone with a credit score that’s better than your own.
Tap Into Your Home Equity
This form of loan is ideal if your debt is still manageable. Your home has equity if the market value is higher than the balance on your mortgage. If you are considering this option, be prepared to do some math.
When applying for a home equity loan, you’re likely to have two choices. These are either the fixed-rate mortgage process or a variable-rate. The best way to think of this loan is as a second mortgage.
Consider the Loan Details
While it may sound obvious, you should look at your repayment time. Payday loans often only have 14 days before you need to repay the entire sum of money at once. While it’s an excellent option for anyone in need of a quick bit of cash, you need to ensure that the funds to repay it will be available.
With a bad credit score, almost any loan you apply for will have a terrible interest rate that could worsen your financial status. The shorter-term makes the loan far more appealing than it should be. With only two weeks to earn the money you borrowed plus interest, you may not be able to pay it back in time.
Get a Payday Advance
While not a conventional loan, if you’re in a pinch, you can always ask your boss to give you an advance on your next salary. This has no interest and does not affect your credit score. This may be ideal when you’re trying to pay off a loan you’ve taken out to avoid late payment charges.
Know What You Can Afford to Pay
Once you’ve seen the available options to choose from, do some math and start working out how much money you'll be able to put towards repaying a loan per month. This doesn’t have to be as detailed as when you recorded the data to show to friends and family.
By doing this, you can spot items to cut until a loan is repaid. These include excess snacks, restaurants you frequently visit, your Netflix account, and anything else that you don’t need. Do this, and you’ll have extra money each month to add to the loan repayment calculation.
With luck, you’ll now be able to afford a loan that offers a hefty interest rate but provides you with the full amount you need.
Avoid Loan Sharks
If you’ve exhausted all options, no family or friends or other loan company will help, you may turn to a shark. We urge you to avoid this as the interest rates offered by loan sharks are exorbitant. You may even incur hidden fees that’ll cost you more money than you can afford.
These sharks are illegal lenders, and at times their method of recouping their losses is just as unlawful. They may reclaim some of your personal items such as jewelry or resort to violence and other intimidation tactics to encourage you to repay your loan with interest.
Sharks also have far more relaxed criteria for borrowing money. This is a crucial identifier when you’re trying to avoid a loan shark. To check if your lender is a legitimate one, you should look for their license or previous history. You may even be able to find reviews about the person or company.
Pawn an Item
If the loan you’ve received isn’t substantial enough, or you need a bit more cash to repay it, you should consider pawning some of your possessions. Pawning an item is far simpler than a loan application, and your collateral is the item you’ve taken into the shop.
With many pawnshops, the interest rate is lower than that of a payday loan and requires no credit check. If you fail to repay the loan within the agreed-upon time frame, the pawnshop may then sell that item to regain the money they’ve lost.
The maximum amount you can receive will never be as high as the item’s actual value. If you know you won’t be able to repay the pawnshop, you should consider selling it instead. Most shops offer three months grace before they will sell your pawned item.
Be Wise With Your Money
Hopefully, a few of these tips can help you out on a rainy day when you desperately need a loan. Remember, always check if you can afford the loan repayments, or if they’d leave you owing more than you can handle. Last of all, keep an eye out for loan sharks and avoid them if you can.