When you’re in a jam, your number one priority is to find the money you need — and fast! When you can’t secure a loan with a mainstream bank, grabbing for your credit card may feel like second nature. But don’t let your laser focus blind you to other possibilities. There are other ways to pay for an unexpected bill, necessary purchase, or surprise repair.
Let’s take a look at the two of them today, so you’re better prepared the next time a bill or repair blindsides your finances!
1. Friends or family
This one is a classic; turning to the people you trust most in your life is one of the best ways to cover something you can’t afford on your own. Unlike traditional personal loans, they don’t often come with a lot of the terms and conditions that can make borrowing a challenge.
In most cases, friends and family won’t draw up a contract detailing your agreement. And they most likely won’t charge you fees, interest, or penalties for taking more time to repay than you said.
However, these same things are what makes borrowing from loved ones a contentious issue. Without strict rules that outline things like the length of your loan and how/when you intend to repay it, things can turn sour.
If another emergency strikes while you’re paying them back, you might not be able to repay the first loan by the time you said you would. Alternatively, they could end up giving you less than you asked for.
There’s also the issue of how to approach someone for help — as conversations about money can be some of the hardest ones you’ll have in life. It takes a lot of courage to ask for help, and potentially a lot of patience, too.
Fortunately, there are ways to improve your experience of borrowing from someone you know. Drawing up a mock contract will help outline what’s expected of both parties. Being open with why you need help goes a long way, too.
2. Alternative lending
While mainstream banks issue personal loans and lines of credit every day, they also deny people these financial products every day. People with bad or thin credit may not meet the traditional bank’s borrowing requirements, resulting in outright rejection or approval for a smaller amount.
A growing number of alternative lenders are changing the way they review and approve loan applications. Lenders like MoneyKey use their online platform to streamline the process, removing many of the complexities that may slow down a traditional application. Online lenders also put less of an emphasis on credit scores, so even people with poor credit may be able to secure an installment loan or line of credit.
Online installment loans and lines of credit typically come with higher interest rates than personal loans, so they’re best used for one-time expenses — like a necessary repair or unexpected bill you must pay. Their simplicity, on the other hand, makes them a valuable financial alternative for people who can’t borrow with a mainstream bank.
If you face an unexpected bill or surprise household repair, remember there are options besides credit cards. With alternatives like loved ones and installment loans online, you may be able to find something that fits your finances better.
So the next time you reach for the plastic in your wallet, take a moment to ask yourself: “is this the best way to deal with my emergency?” If the answer is “no”, it’s time to explore the other possibilities.