Alternatives to Using Credit

As the COVID-19 pandemic lingers on, more and more people are using credit to get through it. The global economy is struggling and people are out of work. Nearly everyone except the very rich has suffered financially. Still when you don’t have enough money to go around, it is important to avoid credit. The interest you pay to credit lenders can be very high. It will be difficult to pay back, especially if you wait. If you need money, there are a few alternatives to using credit you should think about using.

Debit Overdraft

While you shouldn’t overdraft all the time, if you have the protection you can go in the negative for a day or two while you’re waiting for a check or payment. It’s a good idea to use debit over credit when you have the money to spend, but using overdraft can be the difference between accruing interest and avoiding it. Of course, you want to be sure that you have overdraft protection and won’t get charged for it. Work with the bank to agree to an overdraft situation (perhaps by using your savings account and you will be able to avoid using credit for these small purchases and overdrafts.

Online Installment Loans

Another alternative to credit is online installment loans. These loans are available on the internet and are quick and easy. Not only are there long-term repayment options, installment loans online can be paid back in multiple small payments over time. Installment loans vary state by state, look into them today to find out if you are eligible for one of these long-term installment loans that are a great alternative to using a credit card.

Personal Loans

The loans vary on how much you can borrow and the rate depends on your circumstances. But personal loans are another option if you need money but don’t want to open a credit card. Personal loans are for people who need money now but don’t want to use credit. These loans can have fixed or variable rates. Of course, loans will affect your credit score. But if you have a plan to pay the money back immediately it is a good alternative to the long-term use of credit cards.

Peer to Peer Lending Alternatives to Using Credit

It may seem obvious but asking a friend or family member to borrow money is a great alternative to credit. When you’re in a bind and need money for something specific. Asking someone you trust for money will be without interest from loans and credit. This also provides a more relaxed calendar for paying the money back not because it isn’t urgent. But because you know the people you are buying from and you won’t have to pay interest on the money you’ve borrowed.

Short-Term Loans

Often reviled as payday loans, short-term loans can easily be attained but have very high interest rates. Even if you can pay back the money quickly, the interest is still quite high. Still, if you really don’t want to take out a credit account, a short-term loan can be a great way to get the money immediately without having to apply for a credit card.

While a single short-term loan can be managed, if you take out frequent short-term loans you may fall into a habit or a pit of debt. When you take out one short-term loan, you can pay it back and move on. But if you can’t seem to get a handle on the loans, credit might actually be a better option.

Prepaid Cards: Alternatives to Using Credit

If you want to allocate money and are thinking of using credit to do so, you have the alternative of prepaid cards to look into. These cards aren’t reported to a credit agency and can’t help raise your credit score, but they are a good way to separate money for a rainy day instead of using money that you don’t have.

It depends on what kind of situation you’re in and what you need. But there are plenty of alternatives to using credit at your disposal. While credit cards can help you build financial trust, they can also lead to debt. A lower score than you ended up with. Think a lot about your situation to find the best method to solve the financial problems you are facing.