Unexpected financial problems affect everybody at some stage in life. There’s no shame in being short of money when you are between wage packets and borrowing to tide yourself over or to meet a financial emergency is commonplace.
But if you are urgently in need of money, it’s tempting to just borrow money from the first place that offers it to you, regardless of the consequences or how much you’ll end up repaying. So, if you find yourself in the position of needing money quickly, what are your options?
Payday loans have had a very bad press in recent years. High interest rates, charges and other fees and the temptation to rollover a loan from one month to the next led the Financial Conduct Authority to introduce new rules governing payday lending. The result is that there are fewer payday lenders on the market and that those that remain are more responsible in the way that they lend and charge fees and interest.
Payday loans are intended to tide you over from one pay packet to the next when unexpected circumstances leave you short of cash. They are not intended as long-term loans and you are no longer able to roll a loan over for longer than two repayment dates. Interest rates may look high but remember that you are only borrowing for a short amount of time so the amount that you will repay will be far less than the 1,000% APRs which some of them charge. If you borrow, say, £200 for a month, it’s likely that you’ll have to repay about £250 when the loan repayment is due.
If you live in an area served by a credit then these financial institutions can offer a relatively cheap way to borrow money quickly. Although credit unions don’t use credit checks in the same way as other financial institutions, lending criteria can be strict because they want to ensure that you will be able to repay the amount you borrow so as not to disadvantage their other members.
Most credit unions only charge between 1 and 2% a month in interest during the term of a loan. Others may charge less than this but financial regulations mean that they are not allowed to charge borrowers more than 3% a month (about 42.5% annually).
One disadvantage of credit unions is that many insist that you save with them to start with before they will consider lending you money. This may rule them out as a route for borrowing money if you need it in an emergency. However, not all credit unions insist upon this.
Use an overdraft
If you have a pre-arranged overdraft facility on your current account, then this will give you access to money at very short notice. It will be as simple as using your debit card, withdrawing cash from an ATM or writing a cheque. Pre-arranged overdrafts are a safe and relatively inexpensive way to borrow money at very short notice. The bank will charge you an overdraft fee as well as interest on the amount that you go overdrawn by. Some bank accounts offer a certain amount as an overdraft automatically – particularly those marketed by the high street banks as ‘premier’, ‘privilege’, ‘select’ accounts and so on.
If you don’t have a pre-arranged overdraft, you may still be able to go overdrawn. But the banks discourage this by charging very high interest rates and daily fees on those who go down this route. If you don’t have an overdraft arranged, there is also the risk of your cheque being bounced or debit card transaction declined when you need the money the most.
Cash for your jewellery
If you look in your local business directory or search on the Internet, you may find businesses that will buy your gold and other jewellery off you and provide you with the cash quickly. These businesses are often advertised under ‘cash for gold’ or ‘cash for jewellery’.
Using a one of these firms can release cash quickly, particularly when you’ve got jewellery sitting in a box or in the attic. You simply take your jewellery to a shop or fill in an online form. Cash is usually paid out very quickly. Be careful, though, as there are still a few unscrupulous traders out there and remember that the amount you will be offered will be a lot less than the amount you originally paid for the item.
Pawnbrokers used to be a common means of borrowing money over the short term. Although they have declined in importance, there are plenty still around and the chances are that you will find one on your local high street. Pawnbrokers offer loans on the basis of security – usually valuables or jewellery – which are provided by the borrowers.
The pawnbroker will offer a short-term loan based on their valuation of your item – if you repay the loan and interest, the item is returned to you. If you fail to keep up with the repayments, then the pawnbroker has the right to sell the item to recover the cost of the loan.
Start budgeting immediately
If you are in employment, have a regular income or are in receipt of a decent pension, you may surprise yourself at how much cash you can release simply by being more disciplined. Set a household budget with all of your fixed outgoings as priorities, give yourself strict food and entertaining budgets and cut out anything which is unnecessary. You’ll find that you have far more disposable income than you did in the days when you spent irrespective of how much you earned.
Article provided by Solution Loans, a technology-led finance broker with a broad range of financial products and many years’ experience in advising clients of their most suitable type of credit.