Lately we’re being inundated with TV commercials for the latest finance fad of ‘little loans’ and ‘fast cash’ - but for some, they can be a high risk strategy for little reward.
Often you have to repay the money (with interest), within just a few weeks. For example, $500 borrowed is about $640 repaid – which is fine if you’re diligent with budgeting and have money coming in to repay the loan quickly.
But, if you’re late on your repayments you’ll be up for more charges and you could be passed to an external debt collections company. And if they don’t get the money they may place a default on your credit file and your credit history may be damaged for up to 5 years!
That means if you decide to apply for a mortgage or other finance down the track, the bank will think you’re too risky and won’t lend you the money. We’ve seen too many mortgages declined just because of a default on a small amount. A small loan could cost you much more than you bargained!
We worry that ‘little loans’ are a quick fix for some serious money issues. If you’re experiencing ongoing cash flow issues, there are better solutions than a ‘little loan’ band aid. Reviewing your current debt, mortgage, car loans and credit cards and negotiating better rates can help release precious cash. Before you apply for a ‘little loan’, give us a quick call and we can see if there is a better finance solution for you.
For a quick cash hit, it might be better to find the bike or surfboard you don’t use anymore and sell it. Let’s face it, we’ve all got something in the garage that we could flog. Or sign up to some market research companies and pick up a few bucks here and there. It’s safer than putting your credit rating at risk.