What Should You Try Before You Take Out a Loan

 

There are some situations in which taking out a loan is appropriate, such as buying a house or a car. However, in other situations, loans may not be the best choice. Before you take out a loan, it’s important to look at your options.

Loan Alternatives

One of the first things you should consider before taking out any loans is whether you may have the money you need right under your nose.

If you have a significant amount of money in your savings account, it may make more sense to use some of that to pay for whatever it is you would otherwise seek a loan for.

Especially in an environment where interest rates are low, it may make a lot more sense to spend money on which you are earning very little interest instead of borrowing money on which you will spend much more.

If you don’t have a savings account you can tap, another way to avoid taking out loans is to bear down and cut costs.

There are a number of ways you can squeeze more money out of your budget to come up with the money you need rather than considering loans.

For example, if you eat out a lot, you can take your lunch to work and eat more dinners at home.

If your cable or satellite TV service is chock full of extras, such as premium channels, cut back for a few months to save money.

You also can look at the products and services you buy to make sure you are getting the lowest prices.

Use an online comparison site to check prices and then consider switching things such as cell phone service, internet service and insurance coverage to get better deals on prices and save money.

Another way to avoid taking out loans is to find ways to bring in extra money to pay for whatever it is you want.

An easy way to do this is to sell things you no longer have a need for. This might be designer clothes that no longer fit or old electronics you no longer use.

If you don’t have a lot of stuff to sell or it doesn’t produce enough money, you could consider a second job to boost your income.

You could go the old-fashioned route and get a traditional brick-and-mortar second job, such as working as a retail clerk or doing seasonal work for a lawn care firm, but there are also many other options out there.

For example, if you have skills such as writing, photography or web page design, you could do freelance work on a contract basis.

If you are knowledgeable about certain sports, there are often opportunities to become a paid official through local schools, city recreation departments or private sports clubs.

One final way to avoid taking out loans is to ask for the money from family or friends. Though this may not be an ideal option, people who know you may be willing to lend you the money at a low interest rate or even interest free.

Make sure to pay the money back, however, so as not to upset your relationship. The best plan is to draw up legal documents to make your payback responsibility official.

 

3 Responses to “What Should You Try Before You Take Out a Loan”

  1. Millie March 25, 2012 at 1:42 pm #

    There are ways we can save money every month and we just don’t realize how simple it is. At least three come to mind that can yield more than $120 back into your savings account. These are simple switches that can take just one hour of your busy schedule to set up. They include switching from cell phone postpaid to prepaid, switching from all-inclusive cable to basic cable, and switching from Blockbuster to Netflicks. Here is my rationale: Switch from cell phone contract provider such as AT&T or Verizon to prepaid plan such as TracFone, which at just 3 cents a minute is unbeatable! And it also offers incredible international rates, no roaming charges and top of the line telephone equipment. Switch out of the all-inclusive cable to basic cable. Get rid of the all inclusive cable package. You don’t need 100’s of TV channels since you probably just stick to a handful of favorite shows. That’s at least $30 more a month in your savings account. Switch from Blockbuster to Netflicks. There aren’t even any other walk-in stores so it makes no sense to be loyal to Blockbuster! For just $8 a month (versus $25) Netflicks gives you unlimited access your favorite tv shows and movies.

  2. MyMoneyDesign April 1, 2012 at 2:01 pm #

    I agree with trying to find or get the money before you borrow too much. But don’t go taking from any emergency savings or retirement accounts! Pay attention to the loan interest rate and see if it is lower than 8%. If it is, then leaving your money invested is the better alternative.

  3. Thomas - Ways to Invest Money April 2, 2012 at 9:31 am #

    I agree that most times people have the money they need. For some reason eating out buying clothes seem to be a necessity. Its not and with a few adjustments must of us could save more and have money to do other things.

    For me it would really depend on the situation and reason for the loan before I would spend my savings. We have savings that is just for one of us losing our job. Something like a home or business would be better suited with getting a loan.