Strapped for Cash – Need Options
It’s happened to almost everyone at some point in his or her lives, especially with the downturn in the economy the last several years. It’s a situation that can be extremely stressful and feel like it will never end. I’m talking about running out of money before running out of month.
I know several people who have been strapped for cash to pay bills and found themselves in unfamiliar territory, having to ask for or find a loan.
It’s not easy finding your self in a situation where you have to pay a bill but don’t have the money in a savings or checking account to cover it. Even for individuals who earn a good living they can spend their way into situations like these by not managing their finances well.
A good friend and mentor of mine says often: “it’s not what you make, it’s what you save that will make you wealthy”.
So when you find yourself struggling to make a payment on a bill and start looking for ways to cover the expense, keep these ideas in mind.
Options for short-term loans
Certainly, we all have family and friends. If you’d like to keep them family and friends, I’d highly suggest against borrowing money from them. I have loaned money to very close friends who said it was a short-term loan to just get by and they’d pay me back. Those same friends came back to talk about the loan a few months later only to ask for more money. I’ve lost very close friends because of loaning money to them.
The reason the relationships ended with people I’ve loaned money to, wasn’t because I cut them off, but rather their embarrassment of not being able to pay me. They want to avoid me because they think of the loan every time we’re together and that makes them uncomfortable. So take my advice from experience, what sounds like a good idea of loaning or borrowing money from friends and family – Don’t DO IT!
Another option is to get cash advances on credit cards. However, this can be complicated unless you live in Las Vegas where every casino has cash advance machines that look like an ATM. They charge high fees to get the money but it is an option. Unless you have no other alternative I’d avoid this one.
Then there are companies offering cash loans online. Are these businesses just preying on the unfortunate or are they real solutions for people? I’ve had this debate with people for years. In a previous business I started back in 2000, we assisted small business owners obtain credit to grow their companies. The challenge was that a large number of small business owners had horrible credit. The options were minimal and we had to look for alternatives from the traditional bank loan.
As I would tell small business owners looking for a loan, I’ll provide the same advice here; “Don’t look for a loan when you need it”. Banks and lenders prefer to lend to those who don’t need the money and aren’t in a rush.
That being said, sometimes people are in a rush and need money quickly and are willing to pay just about anything for it. If, (and I really mean IF) you find yourself in a situation where you need the money now, can’t wait and are willing to pay for the convenience of the ease and speediness of a loan, then you could consider an online payday or cash loan.
There are a few positives to these types of loans. The ease of getting them, even with poor credit makes this option very convenient. In some cases you’re not even required to provide a credit check. Another positive of looking at these loans online is that you don’t have to deal with sleazy sales reps at a Payday Loan office in your town or have people seeing you walk in to one.
Negatives of Payday Loans
Of course the negatives for dealing with these types of loans are many. The most obvious is the cost of the loan. You can pay upwards of 400% APR. It sounds fine when you hear, “your fee is $25.38 on a $300 loan”, but when you calculate that as an annual percentage rate it’s enormous. Again, if you need the money now and have no other alternative, AND have the ability to payback the note quickly, then it’s worth considering.
Another negative is also one of the positives. It’s easy to get. The ease causes people to not think clearly and take time to consider other options before applying and getting the loan that they could have received cheaper elsewhere.
Most payback arrangements are very short term and if not paid within that time frame, the fees start to stack up. This can put most people into a circle of lending. Borrowing from one place to pay off another. (If you ever find yourself doing this: STOP! Seek the advice of a financial advisor and develop a plan to get out. The stress of borrowing from Peter to pay Paul is not worth it.)
After reviewing all the alternatives outside of friends and family, banks, credit cards, personal savings or selling something you own, and you decide your only choice is to do an online loan, make sure you work with a reputable company.
I’m not recommending any particular website or business for this. I don’t have any experience of working with these lenders directly, but in doing research on the sites and who is promoting these loans I found a few things you need to watch out for.
Make sure it’s a direct lender. There are a lot of sites selling leads to several companies and you don’t want to apply with one of those. You’ll be harassed by sales reps and have your name on a list that will likely be sold to several companies in this niche. Almost every site will tell you if they are selling your information or shopping your application with other businesses. If you can’t see that written on the site look for a phone number, customer service section and a member login button. If they are a direct lender they want people to be able to call them and login to make a payment.
Second, make sure you check the websites reputation online. Do a search for the name of the site with the word “Scam” behind it. You’ll uncover a lot with a simple web search.
Final bit of advice; never borrow more than you can payback quickly. With the exception of education or a house. I don’t believe any loan you take out to buy something should be longer than one year. If you can’t afford to make payments to get something paid off in twelve months, you need to look at a cheaper item or at saving the money until you can afford it. Yes, even a car. Why make payments for four years on a vehicle, you’ll likely get tired of after two?