Deciding Whether or Not a Short-Term Loan is the Right Choice for Your Budget

by Justin Weinger on April 14, 2017

Deciding whether or not to borrow money is always a choice you should not make hastily. First, you need to see if it’s really something that you have to spend money on now. If it’s something you want, it’s better to save up for it versus taking out a loan with interest attached. If on the other hand it’s something urgent like a car or home repair, make sure that you have the means to repay it.

Is a short-term loan right for your budget?

If you’ve suffered a temporary setback such as an unexpected home or auto repair and you don’t have the money to cover it, then a short-term loan like a payday loan alternative might be a way to solve the immediate crisis. It’s a way to get cash fast to fix the repair without having to come up with the full payment quickly. Most of these short-term loans have several payment options allowing you to repay it a little bit at a time over a few months or a couple of years. They are also easier to get an approval on versus a conventional loan from your local bank with minimum requirements. If you can work the payment into your budget without being late, then this is a great way to solve the problem. If however, you don’t make enough to cover your current bills, borrowing more money, even a small monthly payment, is going to put you further behind and end up costing you more than you might imagine.

Getting on track and establishing a budget

Living week to week is very stressful. Any setback, major or minor, can cause you to have a continuous habit of making late payments, or even worse, missing a few. In order to dig out of the hole, you need to learn how to properly manage your money and stick to a budget. Start by making a list of your monthly expenses and then deduct your total income for the month. If your income exceeds your expenses you can turn your current status around and get back on track quickly. The problem then lies with your spending habits. Start by prioritizing your bills, putting your mortgage or rent and household utilities first, a car payment next, and then your other loans and credit cards last. If you have several credit cards, keep just two or three. Start by taking the one with the lowest balance and pay more than the minimum payment and with the rest pay the minimum only. Once your card reaches the zero mark, close it.

Spend your money wisely

In order to make your money work for you, you need to spend it wisely. Having too much debt is never a good idea. It takes just one emergency to create a chain reaction of late payments followed by a lower credit score.  Take steps now to ensure that this scenario doesn’t pay out. Learn to live frugal and make better choices. Having money left over at the end of a month doesn’t mean you get to go on a shopping spree. Instead of blowing your money double up on a car payment or pay down a credit card.

Freeing up money from your budget to pay off debt

There are many ways to free up money each month. Write down every penny you spend for a month. At the end of this time, you’ll have a good idea where it’s going. If you enjoy eating out, dine out less. If you like to pamper yourself with treatments at a spa, do them at home. It’s important to get a visual on where your money goes each month so you know the areas you need to improve upon. If you cut back on a few unnecessary expenses you’ll free up money that you can use to pay down your debt, which ultimately leads to move money in your pocket.

Learning to live within your means

Wanting nice things is nothing out of the norm. But, sacrificing your health is not the way to go. Instead of taking on more debt that you can’t afford, save up for the things you want. If you have an older car and want a new one, work your way up to it. Save up the money and buy it with cash. This probably means you’ll have a car a few years old, but you won’t have a payment to go along with it. Save up for another year or so and then you’ll have the money for your new car, without the interest attached. The same goes for other large purchase like a new HDTV – shop around and wait for a sale. Then pay cash for it. It may take a little longer to acquire the things you want but you won’t be adding any new debt.

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