Additional cash may solve a person’s immediate problems but depending on the way they acquire it, that same cash could cause more trouble than it’s worth. When they need money fast, many people immediately turn to loans. They may borrow from friends or family, their retirement account or a bank. Each of these methods has pros and cons that need to be considered before entering into an agreement.
Friends and Family
Friends and family want the people they care about to be happy. If they have money to lend, they often will unless they had a bad experience in the past. Although getting these types of loans may be easy, paying them back could be complicated. Friends and family rarely use detailed contracts so they could recall the loan sooner than expected if they need the money for personal use.
Retirement accounts often have thousands of dollars in them that have been building over time. When borrowing from a retirement account is an option, it might make sense. After all, it’s a person’s own money. However, this loan has to be repaid and could cause financial hardship. This option should only be used in an emergency because there could be tax penalties associated with a retirement loan.
Using a private lender for Personal Loans is another option most people have available to them. These loans are typically easy to get but the interest rates tend to be high for borrowers with bad credit. It’s important to read the terms carefully and ask questions before signing. Some lenders provide interest credits to borrowers who pay off their loans early and some don’t.
Being short on cash may seem like an emergency but many times it isn’t. In many cases, there’s time to save the money to pay for the unexpected expense. Utility companies often work with their customers to help them avoid disconnection. Landlords and mortgage companies will usually give additional time to make payments, especially for those who are current with the accounts. When cash is necessary immediately, it’s important to weigh the pros and cons of each of the loan options.