Three Worst Ways To Borrow Money On A Budget
As a recently divorced single mother, I have had some experience with living on a strict budget while fighting bad credit. Here are the top three worst ways to borrow money when you’re living on a tight budget.
Do Not Open Credit Cards
Sure, those little shiny pieces of plastic look exciting. They open a door to possibility and a lifestyle we all think we deserve. Shortly after my separation, I received two small credit card offers in the mail. I carefully budgeted what my payment would be on the off-chance I maxed the cards spending limits, and I could afford it. Of course, the cards were for emergencies, right? Perhaps a little usage, with the balance paid in full each month, to help rebuild my credit. There was no annual fee on either card. I was using my brain. Or was I?
When an opportunity came to take a small vacation to Chicago, I bought my plane ticket with one of the cards. Two months later, my very limited income was reduced drastically because of a loophole in the spousal support laws. I regained my alimony upon the completion of the divorce, but during the next year of proceedings, I wasn’t able to meet my obligations. The card was ultimately charged off, harming my credit and my pride. Two years later, I am still trying to pay off a $300.00 plane ticket that will cost me over $2000.00.
If you’re like I was, and you’re living on a tight budget, especially while getting divorced, do not apply for or accept any credit card offers. Ever. Had I not had the card to begin with, I would have missed a weekend in Chicago, but I would have a higher credit rating.
Do Not Apply For A Pay Day Loan
You’ve seen the ads on television and the internet. Montel Williams has even endorsed one company, advertising quick cash for medical bills or just to cover until pay day. The company is actually a referral service for many lenders and the website does not indicate the fees involved, as they vary by lender.
I made this mistake while I was still married, so thankfully, I knew not to do this after my separation. It is advisable to get lån trots kronofogden. In most cases, bailiff services add substantial amount of money to the fees that you pay to the credit card companies.
The interest rate and fees on these loans are akin to loan sharking. One company I know of, when one borrows as little as $300.00, expects six payments of 73.00 each. That’s a repayment of $438.00. While paying $138.00 to borrow $300.00 may not sound horrible if you’re in a serious bind, that’s just the tip of the iceberg. If you are even a single day late on a payment, you’ll receive calls from their collectors (or embarrassing, personal visits to your home) insisting that you refinance your loan. You can avoid late fees if you simply refinance. You can take the $30.00 or so dollars that are available and keep making the same monthly payment. The six month period starts over, however, and even if you’ve repaid several months of payments (most of which is paying the interest, so you’re available amount is still very low) you’ll be stuck with another $439.00 debt.
In contrast, borrowing 300.00 from a bank at 8% interest should result in a payment of approximately $50.00 per month, and cost you less than $10.00 in interest fees. Banks in your area may or may not offer loans this small, but it is worth checking out before you sign your sanity away to our generation’s answer to the loan shark.
With recent changes in the way banks are allowed to process debit card transactions, many account holders received notices disguised as Overdraft Protection offers. Banks are no longer allowed to automatically allow debit card charges that place an account in the red; they are required to decline the transaction instead. This has “cost” the bank all of those exorbitant overdraft fees. They are making up the difference by pushing overdraft protection. This allows them to at least charge credit card-esque interest on the amount you inadvertently borrow.