In these tough economic times of soaring prices and an unstable job market, it’s possible that you could find yourself in financial difficulty.
The need to access cash quickly is a very real problem for many but there are various options available.
Loans
Providing you have a good credit history, you could consider taking out an unsecured loan to put yourself back on a sound financial footing. Typically, lenders will offer anything between £1,000 and £25,000 to be repaid over one to seven years.
You need to be aware of the interest charges on loans of this nature, which are commonly around 7%. A loan of £10,000, for example, will eventually cost you around £11,500 to repay over the four years.
If you’ve struggled to repay debts in the past it’s possible you have a low credit rating, which could lead to you being refused a longer-term loan.
If you need to lay your hands on a smaller sum of money as soon as possible, a short-term loan would help you to overcome this barrier. In applying for these loans, you’re not subject to the same stringent credit checks and the money is often available the same day.
However, short-term loans are not without their pitfalls. You need to ensure that you can repay the money within the shorter repayment period – usually around a month – as the interest rates can otherwise become astronomical.
Lenders also charge fees on short-term loans – a £300 loan would typically include a £75 fee, so you must budget accordingly.
Credit Cards
Credits cards are a convenient method of accessing cash quickly. If you choose an interest-free card, you have the added bonus of being able to effectively borrow money for free.
Interest-free cards offer 0% interest for a certain period of time – perhaps 12 months – and providing you repay the balance within that term, you won’t be charged a penny extra.
You might choose to spread the repayments equally by setting up a direct debit but do ensure that you pay off the balance within the 0% term or you’ll be stung with interest as high as 19%.
If you feel there’s a chance you won’t be able to pay the debt back in time, it might be wise to find a standard credit card which carries a manageable rate of interest.
Credit cards can also be used as a way to manage debts if you have, for example, outstanding balances on one or more existing credit cards, which both charge a standard rate of interest.
An interest-free balance-transfer card allows you to switch the debts from the other cards and then pay off the debt without interest.
Overdrafts
Should you find yourself with financial problems, you might also consider applying to your bank for an overdraft or a temporary extension of an existing one.
However, if you go above the authorised overdraft limit you will almost certainly be hit with heavy penalty fees or high interest rates.
Sam is a journalist who writes for MoneySupermarket.com and other sites on a range of personal-finance issues.
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