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Financial difficulties can arise unexpectedly, whether due to a medical emergency, job loss, or a sudden vehicle breakdown. In such situations, borrowing money or using credit can be a practical solution to keep one’s finances afloat. It can help you cover these urgent expenses and stay on top of your other recurring expenses. However, taking on debt without careful planning can lead to long-term financial stress. That’s why it is crucial to be mindful of how you borrow money and to use credit wisely to avoid falling into a debt trap.
In this article, we’ll explore practical strategies to help you borrow money responsibly and maximize the benefits of credit without putting undue stress on your finances.
1. Research Your Borrowing Options
There are a variety of borrowing options, each offering different requirements, payment terms, and interest rates. When borrowing, make sure to research all your options thoroughly to make the best decision. In the case of traditional banks, they’re still, most definitely, a reliable option, especially for larger loans. But an increasingly popular choice today is borrowing from digital banks like Maya. Digital banks, which operate primarily online, offer the convenience of being able to apply for loans or credit lines without the need to visit a physical branch.
One of the key benefits of borrowing from digital banks is the speed and ease of the process. Digital banks tend to have faster approval times, often allowing you to access funds within the same day. They also typically require fewer documents and have less stringent eligibility criteria, making it easier for many borrowers to qualify—even those new to credit.
For smaller, short-term borrowing needs, a credit card cash advance is also an option worth considering. If you opt for a cash advance, just make sure to repay it as quickly as possible to avoid the accumulating interest costs. It’s also a good idea to find out the cash advance limit of your credit card before borrowing and set a limit on how much you borrow. With the Landers Cashback Everywhere Credit Card, you can easily do this. In the Maya app, you assign daily spending limits to different types of credit card transactions, including cash advances. This level of control can help you avoid your debt spiraling out of control.
2. Borrow Only What You Need
While it may be tempting to borrow more than what is required when you’re in a financial crunch, borrowing beyond the amount you need can lead to unnecessary debt and increased financial pressure. Large loans mean higher monthly payments and more interest to pay over time. Instead of borrowing the maximum amount offered or available to you, focus on covering only the immediate financial gap. This ensures that repayment remains manageable and does not compromise your financial stability in the future.
3. Understand the Loan Terms
Before signing any loan agreement, carefully read and understand the terms and conditions. Pay close attention to the interest rate, as this will affect how much you ultimately repay. Review the repayment period as well to determine whether the monthly payments fit within your budget. Additionally, check for charges such as processing fees, penalties for late payments, or early repayment fees. Understanding these details beforehand can prevent unexpected costs that may put additional strain on your already troubled finances.
4. Avoid Unnecessary Credit Card Purchases
Credit cards can be a valuable tool for managing finances during a period of financial difficulty, offering quick access to funds and the ability to cover immediate expenses. In times of need, using a credit card responsibly can provide much-needed relief by allowing you to buy essential items or pay for emergencies when cash is tight. For instance, credit cards often offer grace periods, during which you can make purchases without being charged interest yet. You just have to pay off the balance in full before the due date.
All that being said, make sure to use your credit card wisely and avoid unnecessary purchases that can contribute to mounting debt. Instead, prioritize using your credit card for vital expenses such as food, utility payments, or medical needs. It’s also a good idea to monitor your credit card spending regularly. If your credit card is linked to an app, like Maya credit cards are, ensure you’re not exceeding your credit limit. To further control your spending, use your Maya app to assign transaction limits to your daily spending, contactless payments, and online payments. It’s an added measure to ensure you don’t overspend while recovering financially.
5. Maximize Credit Card Rewards and Cashback
In addition to using credit cards to pay for essential expenses, take advantage of credit card cashback programs when paying for items you already need to pay for anyway, such as groceries. This can help you stretch your budget and save more money in the process. In the case of the Landers Cashback Everywhere Credit Card, it gives you up to 5% cashback at Landers, 2% on dining spends, and 1% on all other qualified transactions.* You can then convert these cashback points you earned from qualified transactions into vouchers that you can redeem at Landers later on. This allows you to optimize your budget even more while maximizing the flexibility of your credit card.
6. Create a Repayment Plan
Once you've borrowed money and used your credit card, it's important to have a clear and actionable repayment plan in place to avoid the burden of accumulating debt. This includes setting aside a portion of your monthly income to ensure timely repayment. Also, consider paying off your loan and credit card as part of your essential monthly expenses, alongside things like rent, utilities, and food. Additionally, do your best to not miss any loan or credit card payments—and to not pay late, as these can result in penalties and snowballing interest charges, which can all add to your existing financial liabilities.
Borrowing money or using credit can be valuable for managing financial challenges, but it must be approached with care and responsibility. This involves doing your due diligence and making informed financial decisions so you can effectively navigate tough times without jeopardizing your long-term stability. With careful planning and discipline, you can recover from financial hardships and build a stronger foundation for a more secure financial future.
*Transactions that don’t qualify include: cash in, cash advance, quasi cash purchases, casinos and gambling, fuel, supermarket, pharmaceuticals, utilities, telco, and government.
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