What Type Of Places To Borrow Money Should I Avoid?
There are lots of places to borrow money. But are they all good? Probably not, and we're here to tell you which places are better to avoid and which ones you can trust.
What Places To Borrow Money Should I Avoid?
Credit Card Providers
As we all know, credit card providers are one of the most common places to borrow money. However, they are one of the most expensive and, thus, should be avoided as much as possible. To start with, you must pay a transaction fee. Typically, it will be somewhere between 3% to 5%. Then, you must pay interest on the amount you borrow. Not to mention that if you receive a credit card cash advance, the interest skyrockets to a hair-raising 25%!
Your 401(K) Plan
Financial experts have said how 401(K) loans should be completely off-limits. But sadly, that isn't how the law sees it. As it stands, federal law allows you to borrow up to half your balance, maxing out at $50,000.
Once you secure the lump sum, you have no more than five years to pay it back (with interest, naturally). While five years might seem like a long time, there are significant consequences in using your 401(K) as one of your places to borrow money.
Firstly, you are forfeiting powerful compound interest (sometimes known as compounding interest). Put simply, the more money you have in your retirement plan, the more interest you'll earn. So, taking from it reduces your earning potential for your twilight years.
Furthermore, if you lose your job, the full loan amount will be due in 90 days. With all that in mind, it becomes apparent this made our list of places to borrow money you should avoid.
When you sign up for a checking account, they'll often ask whether you'd like an overdraft. Essentially, this is a credit extension from your checking account provider that is given to you if your account hits zero. It means you can keep withdrawing money even when you don't have any.
While this sounds amazing, it's far too good to be true. If you don't repay your overdraft in full on time, your provider will charge a fee. Plus, there is interest to consider, and there is usually a fee per transaction (sometimes around $35, depending on your provider). It's definitely one of the places to avoid borrowing cash!
What Places To Borrow Money Should I Trust?
Thankfully, it's not all doom and gloom. There are places to borrow money you can trust. Such as:
Family And Friends
Borrowing from family and friends can lead you into murky waters. But when done right, it's a sure-fire way to avoid any extra fees and nasty surprises.
Our advice when borrowing from family friends is as follows:
- Be Realistic: Work out how much money you need before asking your loved ones. Try not to ask for any more than you need, as this can cause tensions, especially if you rock up with a new design jacket at the next reunion and you haven't repaid them!
- Make a Contract: The contract should stipulate how much you're borrowing, any interest or collateral they requested, repayment timeline, and how much the repayments will be, alongside their due dates.
Title Pawn Places
If borrowing from loved ones isn't an option, try title pawn places, such as Alabama Title Loans, Inc. instead. In as little as 30 minutes, you might be able to borrow up to $15,000, depending on the value of your car.
You keep your vehicle while you're repaying the pawn, and the process is super simple. The steps to borrow money from our title pawn places are below:
- Complete the online form on the website. It will send your information to your closest Alabama Title Loans, Inc. store.
- Wait for one of our knowledgeable loan representatives to get in touch. They'll tell you about the rest of the process, detail the documents you need to submit, and answer your queries.
- During the call, the loan agent will ask you about your desired meeting place. It can be a location near your home, or you can meet us at our shopfront.
- Whatever you decide, head to the location with your driver's license (photo identification), vehicle, and the vehicle's lien-free title. Please make sure the title is in your name; otherwise, we can't offer you the pawn.
- When you arrive, our friendly loan associate will examine your identification and lien-free title, as well as inspect your vehicle. It will take around 5 to 10 minutes.
- Once the inspection is complete, the representative will let you know whether you qualify.
- If you do, you'll receive the money you are eligible for either on the same or next business day.
Get Help From Us Today
Some places to borrow money are great, and some aren't. So, when your friends or family can't help you, let us at Alabama Title Loans, Inc. give you a helping hand. We have title pawn places throughout the state, and you’re sure to find a location within a reachable distance from your home if you visit the Locations Page on our website. Call us today at 800-514-2274 or submit a short inquiry form for title pawns in Alabama to get started!
Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.