With so many prospective credit streams available, when you find yourself in a situation where you need to borrow money, who should you approach first?
Borrowing money is one of life’s inevitabilities. Many of us prefer not to borrow money, but when it comes to particular purchases such as a house or utility bills we are struggling to pay, it can be difficult to avoid. The benefit of living in the modern age is the sheer number of prospective credit streams out there, but choice is not always a good thing. It can lead down us down the wrong path and to a more expensive source of credit.
So, if you find yourself in a situation where you need to borrow money, who should you ask first?
Savings take a long time to build up, so naturally you’ll be reluctant to dip into your safety buffer unless you absolutely have to. However, you should never consider borrowing money if you have cash in the bank to make a payment upfront. Your savings are the cheapest form of the finance there is, so use them wisely, but always be prepared to dip into them before asking for a loan.
- Family and friends
Asking to borrow money from family and friends will usually be a cheap way to access extra cash and will come without the type of reprisals that can cause a debt to spiral out of control. However, there are also downsides to borrowing money from family and friends. If you are unable to repay the debt when required, it could damage a personal relationship which is worth a lot more than money.
If you plan to ask a family member for money, make sure you agree exactly how much you’re going to borrow and how much you will repay. This should be written down so there can be no backtracking at a later date. Secondly, and this is absolutely vital, you should only borrow an amount you are absolutely sure you can afford to repay. Here are some excellent tips from Wonga SA for those considering lending money to a family member.
- Credit Unions
If you do not have any savings or a family member or friend who is willing to lend you the money you need, a Credit Union is the first third-party you should approach. Again, it’s important to reiterate that you should only borrow money from a third-party organisation if it is absolutely unavoidable.
Credit Unions are non-profit organisations offering personal loans and savings accounts that can be found all over the world. The fact that credit unions are non-profit organisations means the loans they provide will usually be cheaper than those you will find at commercial banks. Credit unions may also lend to those with adverse credit records who banks and building societies may refuse.
What are your go-to sources of personal finance? Have you ever borrowed money from a family member before? We’d love you to share your experiences in the comments section below.