Most of us have been there. You’ve budgeted carefully, are in control of your finances, then an unexpected domestic emergency happens – your washing machine breaks down perhaps, or your vacuum cleaner gives up the ghost.
So, what do you do next?
If your appliance is within the manufacturer’s warranty period or you have extended warranty insurance, then you can contact the relevant company and get your broken appliance repaired or replaced, typically at very little cost (while most repairs are free, some extended warranty insurances may charge a small excess).
If you have a rainy day fund, you can look to use some of that to repair or replace your broken device.
If, however, you don’t have any spare cash to hand – (which for many people may be the case, as figures from The Money Charity suggest with the average total debt per household being £55,442) – then what are your options?
If you have a credit card, using this to buy a replacement device may be worth considering. This is because stuff with a value of £100 or over bought on a credit card typically offers you greater protection, as both the retailer and the credit card provider share the responsibility if things go wrong.
Do be aware, however, that if you don’t clear your outstanding credit card balance every month, typically you’ll be paying interest on the purchase. If it takes you several months to repay the amount, the cost of interest being charged on interest could soon add up.
Some bank account providers will put an authorised overdraft amount on your account. This means that you can overdrawn up to that pre-agreed amount – but you’ll still be charged interest.
If you go overdrawn without your bank’s authority, not only may you typically face interest charges, but an unauthorised overdraft fee on top (in some cases, this could be up to £95.00).
There are a number of loan options that may be available to you. You should note, however, that getting accepted for a loan from your bank may be difficult if you have a less than perfect credit score.
You may also find that there is a lot of form filling and a delay to find out if you have been approved for a loan. Typically, there may be a minimum loan amount you’ll have to apply for (amounts of £1,000+ are not uncommon) so you could end up borrowing more money – and paying more interest – on an amount you don’t actually need.
Another, potentially more attractive option to a traditional personal loan is the short term loan (sometimes also known as a payday loan).
There are number of short term loan providers online, typically offering loan amounts from £100 to £1,000. They may appeal to you if you are looking for a fast decision and may even be suitable if you have a less than perfect credit history.
These loans can be repaid anytime from one month to 18 months (depending on the lender), making it flexible enough to fit in with your budget.
Making the most appropriate decision
No matter how well you budget, there may be times when payday is a long way off on the horizon and you need extra money that you simply do not have – hopefully this brief article will help you make an informed decision as to the next steps for you.
Do remember that if you are already in debt, borrowing more money will only compound the problem. Always make sure that any form of borrowing you are considering can be comfortably repaid by you.