Thanks to the current worldwide COVID-19 pandemic, more people than ever before are experiencing money troubles. With the furlough scheme coming to an end, many people living in areas of the UK that are set to go into Tier 3 restrictions are concerned about how they are going to continue paying their living expenses if they are unable to go to work. Business owners are rightly worried about what’s going to happen to their company if they cannot welcome customers through the door. In this uncertain climate, more and more people are turning to borrowing money to help them get by until things can get back to normal once again. But is getting into debt a wise option?
If you have been left financially short because of the pandemic, it’s important to keep a few key considerations in mind before you turn to get a credit card or loan.
Can You Afford to Borrow?
The first and most important question to ask yourself is can you afford to borrow right now? While access to quick cash might seem tempting, there will be repayments to be made – and if you aren’t able to meet them, you could find yourself in even further financial trouble and your credit rating will suffer as a result, making it harder for you to borrow money in the future for anything else. Consider your situation and determine whether or not you are going to be able to comfortably make repayments in the future. For example, if you have lost your job due to COVID-19 but have a new job as an essential worker lined up, borrowing to get you through the pay gap as you switch jobs will probably work out well since you have guaranteed income for the future.
How Much Do You Need?
Consider how much you need to borrow and do not go over that amount. When applying for a loan it can be very tempting to take the extra if it is offered to you, but remember that this means higher interest payments and larger repayments over time, for money that you didn’t actually need to borrow. If you have found yourself temporarily short on cash due to the pandemic, work out exactly how much you will need to cover the expenses that you are struggling with and only apply for that amount to keep your expenses for the future as low as possible.
How Long is the Repayment Term?
Don’t just think about the here and now when borrowing money – it’s also important to consider how long you are going to be repaying the loan for. In the case of borrowing money to get you through a tight spot that you have found yourself in due to the COVID-19 situation, opting for a short-term loan solution may be a better idea since you are less likely to run into issues with it in the future. Long-term loans mean that you might be making repayments years into the future, and you simply don’t know what’s going to happen. Reduce the risk by opting for a short-term loan from direct payday lenders. You can use Payday UK to find lenders that offer a range of loans that you can pay back in just a few weeks or months to make managing your money easier. Payday UK is a UK-based credit broker that will search a panel of reliable short-term lenders to help you find the loan that is a good fit for your current situation.
Do You Have Existing Debt?
If you have existing debts that you are already struggling to repay due to the pandemic, it’s definitely worth being savvy when it comes to taking out more credit. One option that you may want to consider is to take out a debt consolidation loan that allows you to repay all your current debts in full plus a little bit more to cover the expenses that you are struggling with right now. This is a good option if your existing debts are smaller lines of credit from several lenders, as paying them all off with one loan means that in the future you only have one single repayment to worry about rather than multiple.
Can You Cut Costs Elsewhere?
Consider if you really need to borrow money, or will you be able to manage by cutting some other costs elsewhere for the time being? If you are living on a reduced income at the moment due to the COVID-19 pandemic, it may be worth going through your bank account to see what you’re paying for that might not need to be paid. For example, if you’re paying for a gym membership but haven’t been to the gym in months due to COVID-19, it’s probably worth cancelling or freezing until you feel safe enough to go again. Could you get away with watching Netflix rather than live TV so that you can legally cancel your TV license? Perhaps switching to a cheaper supermarket could help you save money on your grocery shopping to free up money for other expenses.
Borrowing from Friends and Family
It’s also worth considering if you have any friends or family members who might be able to help you out if you are struggling with money during the pandemic before you turn to borrow from the bank or another lender. Borrowing from friends or family can be an ideal solution for many since your loved ones are more likely to be understanding if you’re struggling to make regular repayments, it won’t affect your credit rating and you can agree on personal terms that work well for the both of you.
Sell Your Stuff
Instead of borrowing, another option to consider if you need to make some extra cash fast is to sell some stuff that you don’t need. Perhaps you’ve got old clothes that you haven’t worn for a while; clear out your wardrobe and see how much you could make on Depop. Old gadgets like laptops, smartphones, TVs and even household appliances that have been gathering dust for some time could make you some extra money on eBay, Shpock or Facebook Marketplace. You may be surprised at the household items that sell well second hand, so if you’ve got something that you no longer used, it’s worth trying to get some money for it.
Make Some Extra Cash Online
Another alternative to borrowing money is to find a way to make some extra cash from home. Even if you have nothing to sell online, you might have a skill that others will pay you for. Fiverr is a great place to start as anybody can set themselves up offering a wide range of services that people will pay for. Perhaps you’re great at writing and might be able to find work writing eBooks and blog posts, or if you’re artistic, designing logos or social media graphics could be a way to make some extra cash without borrowing. If you have a bicycle or the right insurance for your car, you could make some extra cash delivering food for companies like Uber Eats and Deliveroo.
The current pandemic has brought about many money worries. But before you resort to borrowing, consider these important factors and think about the alternatives that might be a better option for you.
