Is Borrowing Money a Good Way to Get Out of a Bad Financial Situation?
April 9, 2019
With how easy it is to borrow money with no credit check from a number of sources these days, it can be a tempting option for people in dire straits. It’s hard not to be aware of the fact that this option exists if you live in some places, given how pervasive advertising for it has become. At the same time though, you must always be careful when going down this path. It’s a slippery slope that can end in disaster if you’re not careful, and many people have found themselves in even worse situations than they were in before taking out a loan, simply because they did not think ahead.
Plan Ahead Properly
Which brings us to our first point – planning! It might seem like an obvious one, but you’d be surprised by the number of people who live their lives with a “borrow now, worry later” style of thinking. And even if that doesn’t end in tears the first time, it always inevitably does. The only question is when. There are various questions you can ask yourself before even walking into a bank in order to ensure that borrowing is a good idea.
How long is your working contract? Do you suffer from any illnesses that might prevent you from working in the coming months? What’s the reputation of the lender? Is there a risk you’ll be late on payments? What’s your back plan in case you have to default? These are not questions you should be pondering for the first time right as you’re about to put down your signature.
Don’t Go for the Largest Sum You Can Borrow
Having a good credit history and a stable job can open many doors to you as a potential borrower. Many lending institutions will provide you with highly attractive deals, low rates, and most important, high borrowing ceilings. But just because you’re given the option to take out a huge loan doesn’t mean that you should go for it! Even if you can see yourself repaying the money in full without any issues, don’t go for more than what you really need.
Many people in this kind of situation immediately start having thoughts like “But what if I just took out $6000 instead of $5000 and got myself that new TV I’ve been eyeing for a few months?” It’s all downhill once you allow those impulsive thoughts to enter your brain, and you’ll find yourself on the fast track to being in perpetual debt.
Explore Alternative Options
Just because you need cash urgently doesn’t mean that you should immediately rush to the bank. Think about alternative options before putting yourself in debt. Is there anything of value around your home that you can sell off and won’t miss, for example? This is a good opportunity to do some “spring cleaning”. Of course, don’t sell stuff that you actually need – the last thing you need when you’re already in a bad state of mind due to being short on cash is to feel even worse from losing something you liked.
Borrowing from friends and family is also an option you should not ignore if it’s available. It’s much better to swallow your pride and admit that you’ve hit rock bottom than to deal with creditors and debt collectors hounding you on a daily basis because you miscalculated your repayment capabilities.
Keep Your Credit Score in Check
Don’t allow this situation to bring down your credit score either! You should use this opportunity to actually put yourself in a better place for the future, and if you’re smart about it, that’s certainly possible. After all, your credit score is affected heavily by borrowing money and repaying it in a timely manner. If you keep up with all your loan installments and don’t miss a single one, you should end up with a better score once this is all done.
And that, in turn, will make you much more prepared for the future. You’ll have a smaller chance of finding yourself in a bad financial situation if you maintain a proper credit score. And even if you do end up needing to borrow money again in the future, you’ll have access to much better deals than you do now. Your credit score is a powerful tool that not many people know how to use right, and this could be a good learning opportunity.
In the end, loans can be great when you need to get back on your feet as quickly as possible. And while it’s true that they can also be a problematic factor for many people, this mostly boils down to personal responsibility and planning ahead. As long as you know what you’re getting yourself into, you shouldn’t face any issues.