Cash has become the most sought after thing in today's economy. Everybody needs cash. Some people need cash to fend off debt collectors and foreclosures. Others need cash to pay the regular bills and buy groceries.
Like most Americans, you may be fully engrossed in searching for the ways to make money quickly. There is nothing wrong in your pursuit for money. However, make sure you don't take such actions which will solve your immediate financial needs but will ruin your financial health in future. Read along to know about some traps that can make you earn dollars within a short period of time but lose money in the long run.
Don't fall for traps when you need to earn dollars
Here are the few traps which you need to avoid for protecting your financial future.
1. Applying for cash-advance loans: Payday loans have become synonymous with instant cash. You take out a loan from the lender and swear to pay it back on your next payday along with interests and fees. The interest rates on the payday loans are very high. The annual percentage rates (APRs) vary between 390% and 780%.
If you fail to pay back the loan on the scheduled date, then the payday loan lender will impose exorbitant finance charges on it. He will continue to do so until you pay off the loan.
2. Taking out a cash-out refinance loan: Cash-out refinancing can make damage to your financial health in the long run. In this type of refinancing, you take out a loan which is bigger than your current mortgage. For instance: your current mortgage loan amount is $100,000. You take out a loan worth $200,000. You use the $100,000 to pay off the current mortgage. The remaining amount goes to your wallet.
You're taking out a new loan altogether. In short, you're incurring a new debt. This means that your expenses will increase in the form of bigger monthly payments and higher insurance costs. You may also have to pay a lot of money for the closing costs of the loan. The worst part is you'll lose your home in the event of loan default.
3. Resorting to title car loans: These loans are worse than the payday loans. The main reason is, payday loans are unsecured loans but the car title loans are secured loans. If you default on these loans, then you'll lose your precious car. The interest rates on these loans are very high.
4. Liquidating your retirement funds: Liquidating the retirement accounts seems to be a good option as you're eventually borrowing your own hard earned money. However, have you wondered what will happen if you resign from your job? You'll have to pay back the borrowed amount within a few weeks of quitting your job. If you're below 59 ½ and you don't have money to pay off the loan, be prepared to pay a penalty.
Liquidating your retirement funds is not a good idea even when you have a job. This is because your boss may prevent you from making contributions to the retirement savings account till the loan is satisfied.
If you really need money, then take out a personal loan from friends and well-wishers. Do a part-time job if required. Work for extra hours in your office to earn dollars quickly.