With any financial decision, you should consider carefully all of your options, as well as online loans alternatives. You should be aware of the terms and implications of any types of borrowing.
Online loans alternatives. Is your loan essential?
Firstly, decide if your loan is essential. Online loans and borrowing should never be used for non-essential purchases. With interest rates and charges, your purchase will cost you well above its value in the long run. It can also lead to you getting into financial difficulty.
An online loan, or any borrowing, should be an emergency option. Good examples are emergency repairs, unexpected bills or the need to purchase essential life items for you or your family. However, managing your finances well in the first place is necessary. It’s no good if you spent last month’s wages on a holiday, but then cannot afford to pay a bill this month.
Online loans alternatives. Can you better manage your finances?
We don’t mean to be patronising here. You have likely tried to manage your monthly and yearly finances before considering a loan. Or, are faced with a situation you cannot afford. However, if you have not considered looking carefully at your income and spending to better manage your finances you should.
For some, good budgeting means you can avoid any type of borrowing or debt. This article is not a guide to budgeting, but there is much advice available on the internet. Before you consider borrowing, spend some time analysing your finances and making improvements.
Online loans alternatives. Do you need professional financial advice?
If you are in debt, or regularly need to consider short term lending, seek professional advice. There are organisations which can help with advice on managing debt, getting out of debt, and budgeting for you and your family.
Online loans alternatives. Borrowing money elsewhere
Using your overdraft or credit cards
If you have an overdraft facility or a credit card, one of these could be an alternative for you.
Overdrafts are useful online loans alternatives for when you suddenly have an expense from your debit account. When a bill is higher than you expect, or you overspend without realising. Your bank will still honour your payment but take you into overdraft. Banks will charge interest on your overdraft. There may also be charges for each time you go into overdraft or even every day you are overdrawn. Much criticism has been aimed at banks in recent years for excessive charging. Even though online loans have high-interest rates, if your overdraft arrangement is not favourable, they can be cheaper.
As with considering any online loans alternatives you should understand the exact terms, rates and charges and compare them thoroughly. If you have a larger emergency expense but know you have an overdraft arrangement which will work you can choose to use your overdraft. An advantage of using your overdraft is that if your wages are going into your account soon, they will simply go into your account and pay off the overdraft.
Credit cards are also a simple way to cover an emergency or unexpected expense. You can use your credit card for the transaction. It’s easy to accumulate debt with a credit card. Your card company will take a minimum payment each month rather than the whole balance. Leaving you accumulating interest all the time. You can, and should if you can, pay off the whole balance to prevent interest charges. If you can’t pay off your entire credit card balance you should always pay more than the minimum payment to try and keep your card balance decreasing.
Borrowing from friends and family
You could borrow from a friend or a member of your family. Always make sure you trust that person completely. Ensure you are both happy with any repayments or interest arrangements. And, you must consider what would happen if you did not pay off your debt. Money can cause many family rifts and lost friendships.
Though it takes longer to obtain a traditional loan, the interest rates are usually lower. The application process, credit and affordability checks will be more in depth. To obtain a traditional loan you will often need to visit your bank or lender and provide much more supporting information and proof of earnings or identity. If you can wait for the money, and need a larger amount or want to take advantage of lower interest rates traditional lending may be more suitable. It is difficult for people with little credit history or a poor credit history to get a traditional loan. Traditional loans are usually for a higher value than online loans and over a much longer period. You will usually pay off a traditional loan over a period of months or years. You will make regular payments each month.
Using a pawnbroker
If you own something of value and have been refused traditional or online loans you may want to consider using a pawnbroker. There will be an agreement and terms, and these can vary. But, in essence, a pawnbroker will pay you cash for an item. You can often choose for them to hold an item, which you get back when you pay the debt. Or, they will buy the item.
A pawnbroker should be registered with the National Pawnbrokers Association. They too will charge interest on any borrowing. Importantly, a pawnbroker will never give you the total value, or the insurance value, of an item. They will give you a price based on what they might be able to sell the item for, at a profit to themselves.
Taking a log book loan
A logbook loan works in a similar way to using a pawnbroker. A logbook loan company will give you a loan based on the value they give to your car. Again, it won’t be the actual or insurance value. Logbook loans are a way to get a higher value loan than an online loan, without using traditional lending. If you have a car with value and other lending is not available a logbook loan might work for you. The risk with a logbook loan is if you default on a repayment you will lose your vehicle.