Today’s money hack is related to cheap sources of debt that can be used in emergencies instead of credit card debt or loans from banks.
Although we believe good debt should be handled with care, we understand that debt is often a hard fact of life. If you are suddenly faced with a medical emergency or wish to buy or construct a house for which you do not have sufficient funds, you may need to borrow some money, if not a lot.
Before you head off to the bank or swipe your credit card to get a loan, consider the idea that you can borrow money from alternative sources without damaging your long term asset situation or credit score.
1. Borrow from family or friends
It is important to keep the loan arrangement as professional and transparent as possible to avoid damaging your personal relationship with the lender, especially if the debt is interest-free. Make repayment of this loan a priority.
2. Take home future salaries in advance
Some companies offer their workers the chance to withdraw future wages, and whether or not interest charges are levied depends on the particular company’s policies. Workers can easily meet certain big ticket expenses this way but this tempting idea should only be used in emergencies because it encourages you to spend beyond your means.
3. Use your provident fund as an interest-free loan
Many companies permit their workers to withdraw a portion of their provident fund for specific purposes, like home renovation. The interest charge may be waived but you may be required to pay a small penalty (to compensate for the change in the company’s financial forecasts). Plus, you might have to return the money through greater monthly contributions to your provident fund.
4. Borrow from the bank you work at
If you happen to work at a bank, the interest charge on your loan will be discounted compared to the market interest rate, i.e. the rate they charge the general public. You can also enjoy flexible payback options as a worker at the bank, and make sure you have a solid loan repayment plan that does not dent your budget too much.
As always, make sure you put in place a solid plan to repay the debt as soon as possible, while safeguarding against the misleading nature of interest rates.
It is easy to see that these credit options are better than getting high interest rate loans from banks or through credit cards, but do not let these options deter you from creating an emergency fund that saves you from the troubles of debt altogether.