Short-term borrowing is a fact of modern life. Many people who want to finance an unexpected event or who receive a large bill through the post have turned to credit in a bid to access emergency funds. In 2014 the UK government brought in new rules making it harder for people to keep borrowing from payday lenders but there are other alternatives.
1. Borrowing money against your assets
Not everyone has access to savings or can borrow money from friends or family. An easy way to obtain a short-term loan is to borrow money from a company such as CarCashPoint. If you own a motor vehicle all you have to do is enter your details on their website and you can instantly obtain money against the value of your car. As long as you keep up with your loan repayments, this can be an invaluable resource.
2. Credit Unions
An article on the Thisismoney website describes how major High Street retailers are starting to set up credit unions. These have been in existence for many years, but have normally been on a small scale and usually on a local basis in community centres and run by people in the area. The new setup will be called RetailCure and will have interest rates between 7% to 28% depending on the borrower’s credit history, rather than the high rates that can be charged by payday loan companies.
3. Paying your credit card on time
The Telegraph online explains the importance of paying off your credit card on time. If you do pay in full each month credit works out interest free, therefore becoming a cheap way to borrow money. If you don’t manage to make the full payment each month you will start to accrue interest charges making it a much more expensive way of spending. You should also remember that using a credit card to withdraw money from a cash machine or over the counter will command a fee.
4. Bank overdrafts
If you have a bank account, you might be able to come to an agreement with the bank to obtain an overdraft. These can be set for a fixed term and amount and paid off over that period; some of these can sometimes be interest free, but you will normally pay daily interest while overdrawn and possibly an administration fee.
This will always be cheaper than a payday loan, but if you go over your limit or the overdraft is unauthorised then this can work out as a very expensive loan.
5. Borrowing from your family
In times of need you may have to swallow your pride and contact a family member or a friend to borrow money. If you set out a budgeting plan and work out exactly what you need to pay out and what you have coming in, then you can prove what you will be able to pay back and over what period. It’s a good idea to put this agreement in writing just to stop any future arguments. You don’t want to lose family or friends over money squabbles.
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