Eventually, almost everyone runs into financial difficulties. It's almost un-American to not run into issues sooner or later because of an emergency or bad money management. Since being in a pinch is such a trying experience, people's reactions vary.
If you find yourself with your back against the wall financially, there are resources you can pursue that might offer short-term relief. In order of preference, you might try:
- Tapping into your savings
- Selling off an unnecessary asset
- Applying for a consolidation loan
- Applying for a payday loan
In the sections below, we will be addressing the bottom two options.
Consolidation loans
Debt has a way of sneaking up on people. It might start with a mortgage, car loan and maybe a student loan or two. As life gets comfortable, the individual picks up a credit card and starts buying things they really cannot afford. One day, they wake up and have a mound of debt sitting before them in the form of credit card debt and personal loans.
If things become unmanageable and creditors start calling, life gets really uncomfortable. Sometimes, the pressure builds to the point the individual starts thinking about bankruptcy. It's an option but not a good one because of the damage it does to one's credit.
There is an option that's suitable for people who need an opportunity to reorganize their debt and get back on track. The option is consolidation loans. The consolidation loans from Evolve, have often proven to be a godsend to people who just needed a little help. The people at Evolve understand the pressure clients are under. That gives them the drive to make sure clients get loans that will make a real difference. A consolidation loan allows the borrower to consolidate most or all of their unsecured debts into one loan with one lender. The benefits of taking this avenue include:
- Paring down record keeping responsibilities
- Maybe securing a lower aggregate interest rate
- Being able to lower the aggregate monthly payment amount
- Being able to salvage some credit score damage
While this option might not be suitable for everyone, it's a viable solution for people who have the means to manage their debt with a little reorganization of said debt.
Payday loans
Payday loans offer another emergency option but applying for one demands caution. This is the option everyone should view as a last resort. The interest rates and fees are exorbitant and the loan is due on the next pay date. This kind of loan does not solve debt issues, it causes debt issues or buys a little time at best.
A bad credit score is not usually prohibitive. As long as the borrower has a steady income and bank account, they will likely get approval. The real problems come if the borrower falls into the cycle of continually renewing their payday loan or loans. The high interest rates and fees will eat them alive. That leads us to a discussion about when to get a loan and when to steer clear of it.
When to get a loan
Lenders offer unsecured loans to get you from point A to point B. If you are going to take out a loan, the best time to do so is when you have a realistic plan and future resources for paying that loan off. Your plan should include a monthly budget and a realistic view of what you can afford to spend. If you can find a loan with favorable rates, that's a good time to jump in and make a move. That's particularly true with debt consolidation loans where you can cut your effective interest rate and lower your monthly cash outflow. As a final suggestion, get a loan only after you understand the terms. Don't sign on to something that's going to offer you one surprise after another.
When to steer clear
First and foremost, don't apply for loans you don't need. If you have the resources, even resources you don't necessarily want to use, using them to cover bills and emergencies might be a far better alternative than taking on more debt. Second, don't pursue a loan if there's no realistic chance you are going to be able to repay it. That's financial suicide. Instead of burying yourself deeper, you might want to consider seeking debt forgiveness from your lender or bankruptcy. You'll pay a big price with such measures, but more unmanageable debt will eventually lead you here anyways.
There's no shame in having debt issues. It's the next step you take to deal with said issues that will determine your financial fate. If you use a common sense approach, you'll know which options will serve you best.
