4 Quick Money “Fixes” That Will Put You In The Poor House

When money is tight, it’s tough to resist the temptation to look for short-term solutions to long term problems.  But resist you must!  Going down any of the following self-destructive paths may keep the bill collectors at bay for the time being, but you haven’t really solved the problem.  On the contrary, you’ve greatly exacerbated it since you now owe massive amounts of interest in addition to your original obligations or are otherwise worse off than before.

4 Quick Money “Fixes” To Avoid At All Costs

1. Payday and Title Loans - These  types of loans are worse than a last resort:  they are financial suicide!  Payday and title loans routinely charge interest rates in excess of 50% and sometimes over 100%!  If you can’t afford a $500 debt payment, what makes you think you can afford a $300 interest charge in addition to the $500 debt?  Financially speaking, declaring bankruptcy is probably a better option than repeatedly taking out a payday loan.  Seriously.
2. Credit Card Cash Advances - Credit card cash advances lose their luster right from the start owing to their 3% upfront transaction fees (on average) and high interest rates.  Paying a $30 transaction fee for the privilege of paying 18% interest on a $1000 credit card loan is hardly my idea of a good deal.  While an 18% interest rate is better than the triple digit rates charged by payday loan peddlers, it’s more than sufficient to put you in an insurmountable financial hole.
3. 0% Balance Transfers - 0% balance transfers aren’t all bad.  If you are fiscally responsible and play your cards right, you can actually manage to turn a decent profit from credit card arbitrage.  For those in debt, a 12 month 0% balance transfer offer may even offer some much-needed breathing room and allow them to pay down their debt more aggressively.  I include 0% balance transfers here for two reasons a.) they offer a false security.  In an ideal world, deeply-indebted consumers would learn their lesson, pay off the transferred balance before the promotional rate was up, and henceforth become a model of financial discipline.  Unfortunately, the majority of borrowers would simply use it as an excuse to rack up more debt.  After all, if they were disciplined they probably wouldn’t be in this situation to begin with.  And b.) 0% balance transfers are probably only available to those with sterling credit post-financial-crisis anyway, which disqualifies most desperate borrowers anyway.
4. Tapping Your HELOC – Putting your home at risk to pay off an unsecured credit card or non-recourse debts such as car loans, etc is extremely unwise.  If you default on a credit card payment, the worst that is likely to happen is your credit rating (get your credit score) drop like a rock for 7 years.  If you default on your HELOC, on the other hand, you lose your home.  Which scenario is worse?

A better alternative to all four of the above actions is to get a second job, drastically cut back on spending, and pay off your debts the old-fashioned way:  by spending less than you earn.