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In a recent survey, 39.7% of respondents took out personal loans to consolidate debt and 15.8% used the funds for credit card refinancing. However, if you wish to borrow money for these reasons or others, you must do it smartly. If you don’t, you can quickly run into financial troubles.
To keep yourself safe from these money problems, read on to learn some smart strategies for borrowing money.
1. Make a Plan to Pay the Money Back
Before you even take out the loan, make a plan beforehand to pay the money back. Research different guides and consider using certain financial apps. You can also set up an autopayment that will take a certain amount every week, month, or so on.
2. Borrow Money From Friends and Family
Unlike a money loan that you can get from a financial institution, a loan from a friend or relation will be more forgiving. It’s unlikely that you will have to worry about rising interest rates or hidden fees with this loan. However, the strain that you put on a relationship may be a factor that you don’t want to risk.
3. Improve Your Credit Score First
The best lenders will want the lowest risks. You can prove your financial responsibility to these institutions by raising your credit score before you meet with them. In return, it’s a high possibility that you will get a loan with a lower interest rate.
4. Get a Pawnshop Loan
A pawnshop is a great place to get a fast loan. You can bring in an item of considerable value such as jewelry, electronics, and so on. The pawnshop will then assess the value of the item and then give you a limited-time loan based on the item’s value.
However, it won’t be as easy as paying back the item’s worth to get it back. Pawnshops will also charge you for storage, appraisal, and insurance. Together, these can raise the price considerably.
5. Try a Zero Percent Interest Card
If you want quick money that you can pay back quickly, a zero percent interest card may be the solution for you. These cards offer an 18-month or less grace period where the financial institution won’t charge you an interest fee.
However, if you don’t pay back this fast cash quickly enough, you’ll face heavy consequences. The starting interest rates after the grace period can reach rates as high as 25%. Also, keep in mind that these deals are usually for transferring credit balances and not cash advances.
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In sum, there are many ways to borrow money that are safer, faster, and/or cheaper. Above all, though, the best way to spend less borrowing money is to know your finances and plan your moves well.
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