Whenever you experience financial crisis, borrowing money should always be a last resort. However, if the need is urgent and there’s no other way, the best you can do is to choose the lesser evil. These are the good and bad borrowing options that you should know about.
Direct loan from family and friends
If a friend or loved one is willing enough to lend out a helping hand, this could be one of the best borrowing options of all. Although in most cases a relative won’t be comfortable charging you interest, it is still best to treat this loan as a business transaction. You should agree upon a fair interest rate and payment terms, and put your agreement in writing.
Credit card purchase
If you don’t need direct cash and just want to buy something, perhaps charging the item on your credit card is far better than taking out a loan and especially than making a credit card cash advance. In addition, this should be a wise option if you can pay back the bill on time and you can earn rewards as well.
Believe it or not, pawnshop loans are better than other short-term loans out there. Although you won’t typically get a high appraisal for your item, you’ll have that peace of mind knowing that your credit score is not affected whether you pay for the loan or not. In addition, you are not legally bound to pay for the item. If you pay for it, you get it back, and if not, consider it sold. It’s that simple. Unless your item has a sentimental value, a pawnshop loan is actually a good borrow.
Credit card cash advance
Despite the convenience of withdrawing money from your credit card, there’s a huge price to pay. If direct credit card purchases can have high interests, expect cash advances to be even more expensive. The worse thing is that there’s no grace period, and interest will be charged immediately upon borrowing no matter how quickly you paid for it.
Almost similar to a payday loan, it is a cash advance on your direct-deposit salary. Basically, your bank offers cash upfront which you will repay upon receiving your paycheck. However, this can lead down to bigger debt problems. If your next paycheck won’t suffice and you can’t settle the loan in full, you’ll begin to drag on debt, and if you fall short on cash again, it becomes a vicious cycle.
With a payday loan, you will write a postdated check for the amount you intend to borrow with the interest and fees included, and the lender provides you cash on the spot. This means that the lender will automatically be paid on the next payday. However, just like with bank advance, this can be very expensive. You have the option to roll over the loan for another payday, which means the fees keep on rolling over too.