Personal Finance

What to do when you need a few hundred

Often times we find ourselves in a bind where we need a few hundred dollars to cover the cost of car repairs, fund a special event or for an emergency. The problem with only needing a small amount of money is where to get the money. While there are not a lot of options available to you there are a few things to consider.

The first avenue to consider is a personal loan from a friend or relative. This is the easiest and quickest way to get a loan if you have the option. Asking to borrow money from a family member isn’t always easy or comfortable but there are a few things that you can do to make it easier. First, have a firm repayment date. Second, make sure the amount you are requesting is reasonable to borrow from this person. Third, make sure that you have a valid reason for requesting this loan, not because you spend too much money at the bar.

The next option to consider is your bank. In days gone by it used to be possible to get a signature, or good faith loan from the bank. To do this you would simply ask the manager for a few hundred dollars and your good name in the community and at the bank was good enough for the loan. Of course times have changed and this option is extremely rare to find, however your bank may have two other options for you to consider.

Banks do not normally find it economically viable to lend small amounts of money to a person since the revenue generated from the loan is much less than the cost of processing the loan. Instead your bank will either offer you a credit card, line of credit or over draft on your existing account. Which of these options is right for you really depend upon your credit rating and your current situation.

If your credit rating is not good enough for your bank to be willing to work with you then you need to try either a credit union or a third party lender. Credit unions are fairly different from a bank and their lending rules are also different. If you have a reasonable credit rating you may find that a credit union will lend to you when a bank will not.

The final major lending option available to you is a third party lender. A third party lender is a company that does nothing but lend money to people but is not a bank. A third party lender will over look a lot of mistakes on your credit history and often lends as little as $500. However this comes at a cost. While you loan will be easier to get, the interest will be higher than if you got a loan from a bank.

The final option, and perhaps the least desirable option, is a pay day loan company. Payday loan companies will lend you cash but at extremely high interest rates. The advertised rates usually seem fine, $20 per $100 borrowed, but it adds up very quickly. In fact, more than 80% of people who borrow money can not afford to pay any more than just the interest and thus re-borrow again and again. Using a pay day loan company can easily send you down a path where a $200 loan ends up costing you $500 to get out off.

If you are in need of a small cash loan you have a considerable challenge ahead of you since your lending options are so limited. If you have the luxury of a little time it would be in your best interest to seek the most cost effect solution available, such as an over draft. Failing that you must consider a payday loan. Payday loans are considered predatory lending at should be your last resort.