7 Options for Borrowing Money and When to Use Them
Ideally, your finances should always be healthy enough to cover any costs you might encounter. Realistically, there are many situations where you’ll need to borrow money. Maybe you need a loan for that big car or house purchase, or perhaps you need some cash to last you till the end of the week.
In most cases, people just put excess purchases on their credit card and call it a day. However, there are numerous options when it comes to borrowing money, and some will save you more on interest costs. Here are some to consider.
1. Use Your Overdraft
When you need to make an emergency payment but are out of funds, your bank account overdraft will come in handy. Many accounts provide you with a limited overdraft, allowing you to obtain a certain amount at no fee whatsoever. Sometimes you’ll have to pay interest costs depending on how much you borrow.
This method is one of the simplest and safest, and as long as you keep within your limits and avoid high added interest costs, it won’t hurt you financially. Whether you’re paying off emergency medical bills or covering your rent before your paycheck, this method can help.
2. Take Out A Loan
There are some major life purchases which you can’t cover without a loan. The best example is buying a house. Unless you’re getting paid handsomely, you’re going to need to take out a mortgage and repay it over many years.
The same applies to all kinds of purchases. If you’re going to college, look into student loans. If you’re creating a business, get a startup loan. It’s also worth looking into grants, as these allow you to obtain money that you’ll never have to pay back. The same applies to college scholarships.
You can even take out a bank loan to cover personal purchases, such as a car. The drawback of this method is you’ll often have to pay back a lot of interest. It’s also likely your debt will stick with you for a while. However, for major life purchases and investments, loans are a good idea.
3. Finance Your Purchases
Many stores today allow you to get your items without having to pay all at once. In some cases, you can put down a small deposit then repay the rest over time. Sometimes your only cost is the monthly payment.
This option is often used for vehicle purchases but can apply to anything from furniture to clothes. While some will charge interest, others will allow you to pay your items back at no extra cost whatsoever.
It is well worth considering when you’re making purchases you plan to pay off later, such as a new car and Christmas shopping. But be careful, however; getting into the habit of borrowing too much will ruin your credit. Only finance purchases when you need to.
4. Ask Your Employer For An Advance Paycheck
Sometimes you’re making enough income to cover your costs, but you just aren’t getting it fast enough. If your budget goes south or you get hit with emergency expenses, you might have no money left for your rent and utility bills.
In these cases, many people turn to their employers. Most will be willing to hear you out if you need an advanced paycheck. For instance, if you get paid monthly, ask for the first two weeks in advance.
If your employer trusts you enough, they may even give you next weeks cheque early. Don’t rely on this; asking for advanced payments often won’t look right. However, when you need the money, this is one way to get it without having to pay anything back. After all, it’s your money.
5. Borrow From Family Or Friends
Another way to borrow money without added interest costs is by asking family or friends. If you know you’ll be able to pay it back, then those close to you may be willing to lend you the cash you need.
The benefit of this is you’ll have an interest-free loan from a trusted lender. The drawback is, if you fail to pay it back, you’re ruining a personal relationship.
Make sure you only turn to family or friends when you’re sure you will be able to pay it back. Let them know when you’ll be able to pay it back and don’t ask to borrow too much. While you won’t have to pay interest, you may want to give them a thank you gift to show your gratitude.
6. Take It Out Of Your Savings Funds
If you need money but don’t have it in your current account, you may be able to take it from elsewhere. If you’ve been saving responsibly, you may have a savings account, retirement fund or even college fund to fall back on.
Of course, breaking the rules of your savings funds isn’t a great idea. You should only use it when you must. However, since you’ll be taking your own money from other sources, you won’t have to worry about paying back extra.
7. Get A Payday Loan
Payday loans, also known as cash loans, are becoming increasingly popular. You can go online, request money, and get it deposited straight into your bank account with no hassle whatsoever.
Of course, there’s also a catch. These kinds of loans have some of the highest interest costs. If you don’t pay them back quickly, you’ll be spending much more than you borrowed in the first place.
These are only recommended for when you’re able to pay them back in a timely fashion. These loans got their name because they accommodate people who might need one just before payday to cover a crucial expense. Late payments or failing to pay back will have severe consequences for your finances, so use this option wisely.
No matter what you need money for, there are always options for borrowing it. If you’re planning a major life purchase, look towards loans. If you’re starting a college or business, try to find grants first. If you need money urgently but will be able to pay it back soon, consider borrowing from family or getting a cash loan online. Remember that your main priority should be to save up money, so you don’t have to borrow it. But for those unavoidable situations, consider these options and choose the best one for your purpose.