I know, I know that sound personal finance and cash loans don’t mix very well. But I wouldn’t really be me, and this wouldn’t be the blog you like reading, if I don’t break established conventions from time to time. Before I go on and set out the four conditions under which, I believe, cash loans may not be a bad idea let me tell you a story.
This last week or so, I had very interesting time – stressful but rewarding. I have been doing some writing, actually a lot of writing, and some of it has started to pay off as high impact publications. This, strangely, made me think back to my days in Sofia, in the mid 1980s. I was young, I had just graduated from university and doing my first PhD and let’s face it – my finances were not in a very healthy state.
Back then, I pretty much did what I did five years ago – I earned, I spent and the cash flow was a problem; except that I earned much less and a lot of my income was freelance. Back then, like now, I mostly earned from writing – I wrote policy reports, I penned newspaper articles and I translated from Russian and English. All this was done on a typewriter – remember those? They were used before Bill Gates’ dream had become a reality and PCs were on every desk.
Back then, I would often be short of money – I knew there is money coming in but there was nothing in my purse to buy food and cigarettes with (yes, I did smoke in those days). So, what I used to do is pawn my typewriter – I’ll take it to the pawning shop, they will give me some money, I’ll be able to eat and smoke for a week then I’ll be paid and go and get my typewriter back. I did this a number of times and never failed to get it back; in retrospect, I could have done with a short term loan and continued working but cash loans were not available.
Remembering this made me think that there are situations when cash loans can be useful but taking advantage of these is subject to the following four conditions.
1. Make sure there is definitely enough money coming in to pay the loan off
Taking out a loan and not knowing how you are going to pay it off is irresponsible; taking out a cash loan without making sure that there is enough money coming in is financial madness. It is also unwise to borrow amounts you cannot pay off relatively quickly; preferably in a single payment. Have you seen the interest some of these guys charge?
2. Make sure that the lender is regulated
Well, not to imply anything here, but with some of the advertisements for cash loans I have seen around I would make doubly sure that the lender is legitimate and is regulated. This is not difficult to do; today most lenders operate websites on which they clearly state their company registration number. Look also for information on whether the company is registered with the Office of Fair Trading and whether agreements comply with the Consumer Credit Act.
Generally, to make an educated choice, find out as much information about the lender as you can. If you want an example of what I am talking about you may wish to see something I came across whilst doing the research for this article. If you were to visit Peachy’s facebook page you will see that these guys have close to 2,000 likes (well, many more than I have; hint, hint) and that they provide links to useful information; from how to spot fake £1 coins to how to improve your credit rating.
3. Avoid lenders that:
- Brag about not needing or doing credit checks;
- Promise you £20,000 in three minutes flat; this smacks of irresponsibility and you shouldn’t let yourself be part of it;
- Don’t clearly offer you choice on the number of payments.
There may be other things to watch for but these are, in my opinion, the main ones.
4. Make sure there is definitely enough money coming in to pay the loan off
Yep; the fourth condition is that you go back to your accounts, check your pay and ensure that these contracts you have been hoping to get are really in the bag.
And yes, I do realise that the first and the fourth conditions are identical. One of my favourite writers – Mario Vargas Llosa – said that we shouldn’t worry if we repeat something; it only means that the thing is very important. This is why making sure you have enough money to pay the loan off is on the list twice: it is very, very important.
I hope you never need to resort to cash loans but if you please do make sure that you have checked these four conditions.