Debt is stressful; no one enjoys creditors constantly putting pressure on to pay an outstanding debt. If you have been in this situation or still are then you will all too easily be able to relate to the scenario. The problem is that people under stress sometimes become desperate. They certainly sometimes make decisions out of desperation that they would not make if they were not under pressure and made those decisions with a clear head in the cold light of day. That said, debt will not simply go away; it cannot be ignored. However there is usually more than one solution to a problem. The secret is to select the right one.
Short Term Loan?
One very short term product that is popular is a Short Term loan, a loan designed to pay small bills towards the end of the month when you have run out of money. The idea is that the loan will be paid back in full when the next pay check arrives. The interest rate applied is high but the benefit is a short term solution. The problem is that if you take out such a loan because you are spending beyond your means then it is easy to become reliant on such loans at the end of every month. It would be wrong to dismiss this kind of loan completely but it should only ever be a small part of the solution to debt. If you borrow $500 money for ten days you will certainly be paying back in excess of $600 as long as you can settle as agreed.
On occasions you will be able to roll part of that debt over for another month but imagine the cost if you paid over $100 for just ten days. It is not inconceivable that you can end up paying as much interest as the initial figure you borrowed. Suddenly the service has been well outweighed by the cost.
There is no other product that charges such a high rate of interest. If you have a credit card then a cash withdrawal will be much cheaper but even subsidizing your lifestyle with your credit card can have the effect of increasing your debts because you are ‘buying’ expensive money.
High Interest
In both these cases, Short Term loans and credit card support creating a balance which incurs high interest there is the potential to increase your debts rather than find a solution to them. You must take action by preparing a budget, or getting someone to do it for you. It must be comprehensive and include accurate figures of all your income and expenditure. There may be some obvious savings when you look at things written down in ‘black and white.’ Economizing is certainly important; it may not involve major sacrifice anyway. However economizing alone will not stop creditors ‘knocking on your door’ and you are likely to be in financial trouble for quite a while yet.
Cheaper Money
There are times when debt can make a positive impact on your finances. If you go for a personal loan at a competitive rate of interest as a means of clearing expensive debt, that which is incurring a much higher rate of interest you will immediately reduce your expenditure each month. There are companies operating on the Internet that will look favourably on a loan application that is realistic. That means one that appears to be affordable based upon the applicant’s regular income and current expenditure. That involves the applicant providing employment details and back information. If the applicant appears to be able to repay the loan in full by instalment for the whole of the term there is every likelihood that the application will be approved.
Such a loan should be part of your overall strategy to get out of debt. It may be that a Short Term loan is required but it should be very much a ‘one off’ to solve an emergency prior to devising the strategy. The US Economy has emerged from recession. If you are in full time employment you can reasonably expect to have a monthly pay check coming in for the foreseeable future. Modern day online lenders realize that and even if you have a doubtful credit history they are likely to be able to relive you of your stress relating to debt if you have the determination to find a real solution.
