4 Do’s and Don’ts When Looking for Emergency Cash

Emergencies put the pressure on and can quickly lead to bad decisions when looking to solve a cash flow problem.

In these uncertain times, level-headed thinking is more important than ever, so if you’re in desperate need of cash we look at some do’s and don’ts, to make sure you don’t do something you’ll regret later on.

This is especially important if you have got a poor credit rating, so more limited options!

✘ DO NOT LET DESPERATION DRIVE YOUR DECISIONS

The pressure caused by mounting bills can lead people into making quick decisions that could have bad long-term consequences, such as taking out an expensive loan.

Just because you are desperate for money, this does not mean that you should rush in and take the first option available; this could lead to a poor decision.

• The following article on thisismoney.co.uk is an extreme example of the consequences faced by one man: ‘I borrowed £100 for a night out and ended up owing £19,000’

✓ DO EXPLORE ALL OPTIONS

One of the best options for a short-term cash boost is often one of the last options that we think of;  do not be afraid to ask family and friends for a loan if you believe they may be in a position to help.

Pride or an unwillingness to put people on the spot can be very powerful reasons for not choosing this option but you may be surprised at how many family and close friends would like to help if given the chance.

The loan can be as formal or informal as both sides wish, and the chances are it will certainly be the cheapest option available to you.

If you would like to weigh up the pros and cons of borrowing from family and friends, the Money Advice Service has drawn up a very helpful guide titled – Should you borrow from family or friends? Should you borrow from family or friends?

✘ DO NOT GET AN EXPENSIVE SHORT-TERM LOAN (IF POSSIBLE)

Short terms loans can be relatively easy to get, and fast! But they can be very expensive, and especially if you cannot afford to pay back when agreed, can get you stuck into a debt spiral.

There are two main types of short-term loan:

• Payday: typically borrow up to £1,000 for up to four weeks (your next payday), with high-interest rates up to 1,314% APR. To give you an example of costs from the lender Cash ASAP (Representative Example):

£250 loan for 3 months at a fixed interest rate of 290% pa. The total amount payable is £351.31 in monthly instalments of £123.06, £124.38, and £103.87. This is based on the amount of credit plus interest, no other fees apply.

• Instalment: typically borrow up to £2,000 for up to 6-months, with high-interest rates up to 1,314% APR. To give you an example of costs from the lender Cash4UNow (Representative Example):

Loan amount £200 repayable over 4 months. Total amount repayable £332.00 in 4 payments of £83.00. Interest 292% pa (fixed). REPRESENTATIVE 1,306% APR.

If you can show suitable affordability, and meet all the other lender criteria, there loans can be relatively easy to get out, and quickly also.

Though they are an expensive solution, so if you can avoid this type of loan please try too.

✓ DO STOP AND THINK

As the saying goes “there are many ways to skin a cat”, so if you have a problem that needs solving, there could be multiple potential solutions.

In the example below, we look at some of the potential solutions to a ‘boiler emergency’.

Let’s say your boiler has just broken down and you have no spare cash to fix it; we are going into winter and without a boiler it’s there could be no heating of hot water! So, let us consider the following possible solutions:

• Drive for the lowest price – get multiple quotes so as to find the very cheapest price to fix it, which may be less than originally thought? Challenge the tradesman to do the job as cheaply as possible and keep their price low. Is there a way that you can push down the cost of your potential emergency expense?
• Alternative cheaper solutions – let’s say it turns out that it’s only the heating that is not working? One short-term solution could be to buy some electric radiators which could be a lot cheaper than fixing the boiler? Is there an alternative cheaper solution to your problem?
• Other ways to save money – are there other expenses that you have that you could cut down on temporarily, to save the money for the emergency repair? What other things could you cut back on?
• Borrow as a last resort – borrowing should really be your last resort, as it always must be paid back! Firstly, are there friends or family who would be able to help you out with a small loan? If this is not possible, then for any other loans, take your time and look out for the cheapest option.

So, before you start taking action to solve your cash problem, please stop and think of all the possible solutions first.

STILL, NEED A LOAN?

Read this article and still need a loan?

There are emergency loan solutions for bad credit that are often much more cost-effective than short terms loans such as payday, or instalment loans.

See our fast guarantor loan deals.