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Although small loans can be useful for funding emergency expenses, it is not a good idea to rely on them as a regular source of ‘income’.
The eligibility criteria for a payday loan – a type of small loan, is often less strict than other types of borrowing.
The application process can be much quicker than, for example, a bank loan, making them convenient for times when you need cash fast.
However, small loans often come with higher interest rates, making them expensive. If not managed correctly, taking out small loans too often can result in you getting further into debt.
CashLady looks at how you can take back control of your money management and, avoid small loans.
Draw up a budget to avoid small loans
It may seem obvious but the key to living without the need to borrow money is to make a budget and stick to it.
There are many websites, such as the Money Advice Service, that can help you to create your budget. Here at CashLady, we also have a guide on how to write and manage income budget properly. You may find these websites useful to get you started.
Otherwise, you could use a spreadsheet or simply write your budget down on a sheet of paper.
First, make a list of your monthly (or weekly) incomings and outgoings.
Outgoings include things such as your mortgage or rent, energy bills and food costs.
Then, write down the money that you have coming into your account on a regular basis. This may be your salary, any rental income or tax credits.
Next, add all of your incomings and outgoings together in two separate columns.
By taking your outgoings away from your incomings, you can see how much disposable income you have left each month. This is the money you can use for non-essential things such as socialising, and hobbies.
Be disciplined and cut out the non-essentials if necessary.
Avoid small loans by shopping around for the best deal
The internet makes it really easy to compare prices in different shops, without leaving the comfort of your own home.
Shopping around is essential if you need to make a big purchase but can also make a difference to your weekly food shop. Going to different supermarkets for different purchases can save you money, but you will need to balance petrol/ travel costs against any savings.
If you see something you want that is not within your budget, it is a good idea to ‘walk away’ and see how you feel once some time has passed.
Writing down a list of what you want and then re-looking at this list in 30 days, is a good way to give yourself the space you need to decide a) if you really want it and b) if you can afford to buy it.
Consider switching your energy supplier to avoid small loans
No matter which supplier you use, the gas and electricity coming into your home will be the same. So why pay more?
Use a comparison engine, such as uSwitch, to find the best deal for you.
Do this on a regular basis to ensure that you are still on the best deal with your current provider.
Switching your gas and electricity supplier is often a simple and straightforward way to save some pounds.
Avoid Small Loans: look at how to increase your earnings
If you’re struggling to make ends meet, it may be beneficial to look at ways of increasing your earnings.
This could include:
Acquiring a part time job
Applying for a part-time job to supplement your main earnings, can be a good way to boost your income and avoid those small loans.
Many retailers need staff to work during the weekend. If evenings would be better, you could try looking for bar work.
Additionally, some businesses may offer you staff discounts, so you could save on your essentials, too!
Rent out your parking space
If you’re renting your property, you may need to seek permission from the owner first.
Sell your unwanted items
How to avoid small loans: final thoughts
It’s essential to be disciplined if you want to avoid small loans.
By drawing up a budget and ensuring that when you do need to spend money, you are getting the best deal, you can start to take control of your finances.
Looking at how to up your income through a second job or selling items you no longer need, can also help you to avoid credit.
If you are concerned about your debt, you can talk your situation through with a charity such as StepChange.