Temporary ‘quick fixes’ may do more harm to finances
When adults find themselves in a tight financial bind, it’s natural to want to seek out temporary solutions until they find a way to fix the problem. For example, individuals burdened by an unexpected medical bill or auto repair may turn to their credit cards when they don’t have the cash on hand. But over time, relying on credit cards, payday loans or cash advances may further contribute to an individual’s fragile finances and cause credit score damage as well.
So instead of relying on fast solutions to cover sudden costs, it’s important to know and seek out more sustainable options to avoid long-term damage, according to Fox Business.
First, it’s crucial to seek out help. Many individuals may think that the loans and credit card debt they carry is their problem alone and making the minimum payments on their bills will be enough to eliminate their balances. But the truth is, there are a variety of resources available, including credit counseling services and financial advisers, that can inform individuals of effective debt management strategies. For example, loan calculators, budgeting tools and tutorials can help adults find the most efficient ways to not only pay off their balances, but also establish a healthy savings fund.
Second, try to avoid temporary fixes that may result in more harm than good. For example, payday loans may seem like a useful solution, but the interest rates can be extremely high and result in significantly more debt over the course of a few weeks. Credit card cash advances are another popular method many adults turn to when they’re in a bind. But cash advances typically carry a separate and much higher interest rate than their standard credit card rate. For example, adults who carry a credit card with a 12 percent annual percentage rate may find that the rate attached to cash advances is as high as 25 percent. For this reason, it’s crucial for cardholders to read the terms and conditions of their credit card agreement before turning to these types of quick cash.
Instead of relying on these types of tactics, seek out more cost-effective ways to cover sudden emergencies. For example, those facing hospital bills should find out if there is a repayment program they can enroll in. Or workers may ask if they can pick up an additional shift or seek out a temporary second job. In some cases, turning to family members for a short-term loan may be more beneficial than relying on credit. In the meantime, adults should continue working with a professional to find long-term solutions to their financial problems.