There are a lot of reasons you might need money. Maybe your car needs unexpected, expensive repairs. Maybe you're facing a large medical bill or your refrigerator finally died. If you don't have enough money in your savings account, there are ways that you can get the money you need. But it's important to know the pros and cons of each one before you take the next step.
First, Get A Clear Picture of Your Financial Situation
Before you spend the money, it's important to sit down and carefully review your financial situation to make sure you're not going to put undue strain on your budget. If you don't have an up-to-date budget, make one. There are free budget calculators and printable worksheets online that you can use to get started.
Once you know how much money you're making and how much you're spending, check and see how much money in your budget isn't already committed to your current expenses. You may be able to use some of those funds, although you want to be careful to continue to save for future needs.
Carefully Consider Your Options
If you don't have the money you need in savings, there are several different borrowing options you can consider. When choosing which works best for you, ask yourself the following questions.
- How long will you need to pay the balance off?
- What's the interest rate?
- Are you already carrying a balance on the card?
- Will you need to continue to use the card for other expenses, increasing the balance and the amount of interest you'll pay?
- How close will using the card for this expense take you to your credit limit?
- Will you be able to make more than the minimum payment each month?
- What's the interest rate and how much time do you have to pay the loan back?
- Is the interest rate fixed or variable?
- Are there fees to apply for the loan?
- How much is the monthly payment?
- Will you have to provide collateral for the loan, that is, do you have to pledge something of value, like your car, that the lender can take if you do not pay the loan back?
- Is there a penalty for paying the loan off early?
Borrowing from family or friends:
- Will borrowing this money put a strain on your relationship?
- What's the interest rate and how long do you have to pay the loan back?
- What would happen to your relationship if you were not able to pay the loan back?
- Will you have a legal contract for the loan that outlines each party's rights and responsibilities?
Another option to consider is asking your creditor if you can spread the payments out over a longer period of time with a payment plan. If the expense isn't an emergency, you could delay it and save some money so you can pay for at least part of the cost without borrowing.