Here we are going to consider some ways to avoid online loans. You should not use an online loan service regularly. It should be a one-off incidence. An online loan should not be used more than twice in a year, at most. You may feel that an online loan is not suitable for you, be worried about repayments, or have been refused for an online loan.
So, how to avoid online loans.
Avoid online loans. Is your purchase essential?
Online loans should be used for emergency and essential purchases or spending only. They should not be used for spending on holidays, presents, entertainment or non-essential clothing. Any purchase you make using money from an online loan will cost much more than its initial value when you add the interest, and charges, from any type of borrowing.
Essential or emergency purchases are more like unexpected, but necessary bills and expenses. Emergency dental surgery which you have to pay for could be one such example. You are in pain; your dental issue is affecting your work or day to day life and has to be remedied. Another example is a sudden repair on the vehicle that gets you to work each day. You must fix your vehicle to be able to get to work. But, your wages are not due until the end of the month. You take out an online loan to pay for the repair and repay it as soon as you are paid at the end of the month. You can pay for your car repair and continue to get to work.
It’s important to remember that repaying your online loan next month will cut into your wages substantially. So, you always need to think about how you will get through the next month or the month after that while paying your repayments. If you don’t think you will be able to and will have to take another loan or roll over your loan payment, you should be considering how to avoid online loans.
Avoid online loans. Can you better manage your finances?
You may have already looked at how you can manage your finances, save money, and avoid debt. If you have debt or are looking at online loans, you should take an in depth look at your income and spending.
We’ll touch on a few points of advice here. However, to properly manage your finances, research how to budget and save money online.
Look at your income and spending to avoid online loans.
Make a list of your income, include:
- Tax credits and child benefits
- Any pensions or other income
Make a list of your essential spending, include:
- Grocery shopping
- Utility bills
- Rent or mortgage
- Any debt repayments or credit cards
- Essential clothing or school expenses
- Running and maintaining an essential vehicle
- Any other essential spending
Total your income and essential spending.
If your essential spending is more than your income you may need to try and reduce your essential spending. We’ll look at that a little later. If you have money left over after essential spending this is your disposable income.
You now need to make a list of your non-essential spending. If you are needing to borrow money for emergency purchases you need to consider reducing your non-essential spending so you have some money kept over for emergencies. If you can, save some money each month into a separate account for emergencies, such as a washing machine or car breakdown.
Total your nonessential spending, include:
- Mobile phone, data or TV packages you might not need all of
- Spending on days or nights out
- Non-essential clothing
- Running a second, non-essential vehicle
- Any spending on any purchase you can do without
Reducing essential spending to avoid online loans
If your essential spending exceeds your income you probably need to take some professional financial advice. You should not reduce essential spending so far that it causes discomfort to you or your family. For example, you need to eat, and you need warmth. You need to be able to get to work and any dependents to their work or school.
Here are a few tips on reducing essential spending:
Consider changing utility providers to find lower rates
Turn your thermostat to a regular, comfortable temperature. Before turning it up – are you wearing warm clothing? Whilst you don’t want to be sitting in your house in a coat, wearing warm trousers, jumper and warm socks can really help.
Turn off lights when you are not in the room. Don’t leave the TV or computer running when not in use.
Saving on groceries:
- If you throw away food you are throwing away money – plan your meals
- Plan your meals before you shop so you are buying what you need
- Plan meals on a budget, look for family recipes which are healthy and filling but not expensive
- Compare prices, where you can choose cheaper alternatives
- Can you do without fizzy drinks and treats and concentrate on buying meat, vegetables and fruit
- Can you find a better way to buy healthy items? For example, fruit which is in season may be cheaper or available at lower prices at a farmer’s market.
- Look online – there are lots of tips on feeding yourself or a family on a budget
Can I increase my income?
This is not always easy. Changing jobs might be risky or just not an option however you might be able to:
- Ask for a pay rise
- Take extra hours. Overtime or a part time job, even on a short-term basis.
- Sell things you don’t need on eBay or locally
Where can I get advice on managing my finances?
There are many independent or charity run websites where you can find good, independent advice. Your local Citizens Advice office on your high street will also be able to point you in the right direction.
Are there alternatives to online loans?
There are alternatives to online loans but they have advantages and disadvantages. We consider these in more depth in our article “Alternatives to online loans”. If you require general infromation on online loans, please read our quide post “what are online loans?”