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Cash Emergency Loans: Are They Worth the Risk?

If you face unexpected bills, or expenses, your first stop might be the local cash loan company to raise some fast funds. However, most of the options people use come at a high price. You might not see ahead how long you will pay off the loan or how much extra the company charges, or you will ruin your credit rating. Most banks offer inflexible loan terms, and you will need to pay an early repayment charge when you pay off the total amount outstanding. To help you decide on the loan or financing options, here is an overview of short term personal finance available.

Cash Loans on Your Assets

If you have anything valuable, you can visit your local pawnbrokers and get some money based on the value of your item. You can use anything, from a laptop to a gaming console or jewellery. You need to bear in mind, however, that if you don’t manage to buy the item back in a certain period of time, you might lose it as the company will sell it for a profit. It is also important to mention that the valuation of your item is up to the company, therefore, you are not likely to get the best deal. Still, if you are certain that you only need the cash injection for a few weeks, this option is safe.

Secured Loans

“Personal loans” by Cirofono is licensed under CC BY 2.0

If you own your house or car outright, you can get a secured loan based on the value of your asset. You can get a simple title loan completely online that uses your car as a security deposit. You will be offered a certain amount of the loan and a term that suits you, based on the value of your car. You can keep on using your car every day, but there will be a note on your registration document about the financial agreement. If you don’t make the payments on time, you will risk losing your vehicle.

In Store Finance Options

If you need to make an emergency purchase, you might opt for buying an expensive item on an interest-free credit deal. This is a good way of spreading the cost of the largest investments in your home, but you shouldn’t overuse the method. Every time you make an application for one of these deals, you will get a credit search on your account. Therefore, if you buy everything on credit, you might end up being offered a higher interest rate, as companies believe that you are stretched too far.

Credit Cards

Credit cards are suitable for raising emergency cash and paying it off straight away. If you have a good credit rating, you can get accepted for a zero percent balance transfer deal, and you will not have to pay interest for 12-18 months. Credit cards are known for damaging your finances, however, as if you don’t make the repayments on time, the balance increases significantly and your credit card account gets out of control.

Personal Loans

“Loans and Debt” by Jonathan Rolande is licensed under CC BY 2.0

You could get traditional personal loans with a fixed repayment and fixed term, but they are not the best solution for short term cash emergencies. You will be tied to a contract, and your credit rating will go down with each application. You might get a flexible loan that you can repay early without a penalty, but the interest rate will be significantly higher than on traditional personal finance. Unsecured loans require a stable income and background, and if you don’t have this, you might be offered a higher-than-average rate or get declined.

Getting Money from Friends

The cheapest and easiest solution is to borrow money from your friends or family members. You will not get a credit search, and it is less likely that your friends will charge you interest on the short term loan. You must, however, make sure that you can pay the money back on time, as owing money for a long time can damage your relationships.

Whenever you are stuck with your personal finances, you might be looking for the optimal solution to get back on track without taking unnecessary risks. You might go down the traditional channels, or borrow money on your assets, but you need to be careful not to ruin your credit report or lose your valuables during the process. Think through your options carefully, and consult with an experienced financial advisor if you cannot decide. You want to get the most benefits of your finances without risking your future.