3 Tips For Staying Away From Non-Banking Loans

3 Tips For Staying Away From Non-Banking Loans

A recent study put out by FINRA found that 26% of Americans engaged in non-bank borrowing in 2015, which I hate to see.

These types of loans include auto title loans, payday loans, or using pawn shops or rent-to-own stores.

Non-bank borrowing methods are likely to come with extremely high interest rates. When you are late on a payment, or default on these types of loans, you could pay sky-high rates and fees, plus risk losing your car on title loans.

These loans often attract those with poor credit, lack of access to more traditional sources of credit, or both.

Since you are one of my Financial Fitness Magazine readers, I know you’re smarter than that.

You know being smart when it comes to borrowing and banking is crucial to your financial success.

It is bad for your finances to put yourself in positions where you think you need to access these high-risk borrower credit sources.

Which is why I’m here to help you stay away from bad financial decisions like taking out loans from non-banking sources.

Here are 3 Tips for avoiding these non-banking loans, and getting more favorable loans from traditional bank or credit unions:

#1:  It’s all about cash flow.
This means managing your cash flow, by tracking all of the money coming in and going out of your pocket. I call this knowing your “Money In and Money Out.”

#2:  Build your credit.
The best way to avoid shady and high-interest loans is to be responsible with your finances so you can qualify for loans with reasonable terms. If you don’t have good credit now, or you have no credit history, I suggest you start small, by applying for a low-limit credit card. If you can’t get one, you might have to get a secured credit card to start the credit-building or rebuilding process.

#3:  Know your needs and wants.
The next time you find yourself wanting to go buy something, and you’re going to buy it on credit, think again. Ask yourself, “Do I really need this now? Or is this just something I want, that can wait until later, when I have the cash to buy it?”

Stopping to think about these 3 tips before you whip out your wallet or purse is smart. Do you know how much money you have coming in and how much you have going out? Do you need to build your credit first? Do you really need to make this purchase?

The bottom line is… Don’t borrow the money if you don’t need it. Ask yourself each time you make a purchase if it’s a need or a want. If it is a need, see how you can make the purchase in cash, instead of running up your credit.

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5 Tips to Know Before Buying Your First Home
Paying For Chores Teaches Valuable Financial Lessons
6 Tips For Dealing With Debt Collectors

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