When most people have an unexpected bill that they did not prepare for, they turn to their credit cards. The problem is that credit cards usually charge pretty high interest rates. It’s fairly easy to run up a large balance and get hit by extra interest charges and fees. That means that purchases will end up costing a lot more than they should in the long run. Also, some folks don’t even have a charge card or have already exceeded their maximum balance. It might be a good idea to consider some alternatives to credit cards.
These are usually called P2P loans. They are arranged between individual lenders and borrowers. There are many online P2P loan companies that act as middlemen between the borrowers and the lenders. While it still helps to have decent credit scores, these services also may allow potential borrowers other ways to make a case that they deserve a loan.
Because these middlemen don’t need to charge as much as finance companies and banks, terms may be more relaxed for borrowers than the terms that a bank or finance company would offer. In fact, some people use P2P loans to pay off high-interest credit cards.
Home Equity Loans
People who own a house may have several good ways to take cash out of their house. These include home equity loans, home equity lines of credit, and refinancing. Of course, the house has to have a higher market value than the balance of the existing mortgage. It is this difference between the market value and the mortgage balance that is the equity that might be borrowed against.
Unlike credit cards, these loans are all secured by the value of the house. Typically, secured loans have lower interest rates and don’t impact credit scores as much. Also, lenders may be more relaxed about qualifications because the loan is secured by the equity in a home.
Loans From Family and Friends
Family and friends might be willing to loan money to help a loved one get out of a tough spot. However, it’s really important to treat these arrangements like business deals. Neglecting to pay them back in a timely manner can strain relationships and eliminate the chance of ever getting help again.
Why Consider Credit Card Alternatives?
Ideally, everybody would have the savings to cover an emergency. However, most folks have been caught by an unexpected trip to the dentist or auto repair shop. It might not be possible to put off everything until enough money can be saved to pay for it. It’s good to know that some people might have better ways to raise extra cash than to simply pull out their plastic.