Need to Borrow Money Just to Keep Up? Here’s Your Financial Escape Plan

When you need to borrow money–unless it’s an emergency situation–it probably indicates that you suffer from financial problems that go beyond the immediate situation. According to, only 14 percent of today’s borrowers can truly afford to repay a short-term, high-interest loan.

People are often driven to borrow money by desperation and rose-colored outlooks about their ability to handle the debt. Many people get caught in cycles of debt because they need money now to pay off their existing debts. You need an escape plan to pay off debt and increase your savings to prevent future cash emergencies.

How to Pay Off Debt and Strengthen Your Finances so that You Don’t Need to Borrow Money

Most people who need to borrow money do so for two reasons–either they’ve taken on more debt than they can afford or they’re spending too much money. Plenty of people borrow money responsibly when an unexpected emergency happens. However, it’s never wise to get a loan so that you can buy impulse or luxury items. That’s how credit card companies trap people in debt.

An article at recommends getting out of credit card debt as the first step in building a stronger financial profile. Credit cards generally carry higher interest rates than other debts, such as mortgages and secured loans, and those who seriously want to be debt-free should begin by paying off any other high-interest unsecured loans. Forbes recommends escaping debt by using one of the following strategies:

  1. Debt Avalanche
    This is the method that most financial analysts recommend. You list all your debts and the corresponding interest rates. Continue making minimum payments, but pay any extra on the debt with the highest interest rate. This method will reduce your overall debt faster. Once you’ve paid off the debt with the highest interest rate, go the second highest.
  2. Debt Snowball
    People who need reinforcement respond well to the debt-snowball method. List all your debts and the amount owed. Unlike most advice to pay off the debts with the highest interest, this approach is to pay off the smallest debts as quickly as possible. This method helps to eliminate more creditors in the fastest way, and the reinforcement can encourage you to greater debt-reducing efforts.
  3. Debt Blizzard
    This method combines the best features of the debt-avalanche and debt-snowball methods. You again list all your debts, the amount owed and the interest rates. Pay off the lowest amount first to get a psychological boost, and then attack the debt with the highest rate. Alternating these methods lets you reduce your overall debt faster while rewarding you by eliminating debts a little faster.

Regardless of the methods you choose, you should apply any large amounts of cash toward paying down your debt. Using your tax refund to reduce debt provides more financial equity because you’re eliminating interest charges in the future. The twin to reducing debt is cutting expenses. Plan a budget, stick to the plan and eliminate frivolous expenses.

Why It’s Risky to Borrow Money Online

It’s easier to borrow money online than it is to borrow from a bank. According to, online lenders are willing to lend money to people with bad credit, and easier approvals can tempt borrowers to spend beyond their means. That’s why it’s easy to get into debt, and many people are forced to borrow money to pay ordinary living expenses. Person-to-person lending sites, short-term lenders, Native American casino lending and other alternative loan products provide enormous temptations.

That doesn’t mean that all online borrowing is bad. If you need emergency funds to avoid penalties, late charges, increased interest rates and other expenses, short-term loans can prove beneficial. The trick is to know when it’s cost-effective to borrow money online. If you can’t repay the debt comfortably, borrowing isn’t the answer.

Developing a Plan to Strengthen Your Financial Profile

Getting out of debt isn’t the ultimate goal–you could easily get in trouble again unless you learn how to handle your finances more strategically. One of the first financial lessons that people new to the workforce learn is that taxes deducted from pay are burdensome, but big refunds at tax time can be the greatest source of disposable income for large purchases in any given year. Out of sight money quickly fades out of your mind.

That’s why increasing the money withheld from your paycheck for taxes is an excellent way to save. Other similar methods of strengthening your finances include getting the right insurance to protect your family from risks. A report at recommends that you consider the following strategies to strengthen your financial profile:

  • Increase Your Retirement Contributions
    Try to maximize your savings to IRA and 401(k) accounts. These funds can provide a lifeline in an emergency while building your net worth.
  • Investigate Other Benefit Options
    Often underutilized, health savings accounts (HSAs) and flexible spending accounts (FSAs) can provide tax-advantaged savings to cover out-of-pocket expenses. You might also investigate programs such as commuter benefits, fitness reimbursement programs, benefits for families of children with special needs and employer financial wellness programs.
  • Get Insured
    Various types of insurance can build wealth, guard against risks, finance health care for your family and insure your home and possessions.
  • Track Expenses
    Expenses work like savings–if you don’t see them, you won’t usually think about them. That’s why it’s important to track your expenses. When you discover how much your family spends on fancy coffee beverages or other snacks, you will probably make some serious spending cuts.
  • Earn extra Money
    Try to find ways to earn extra money by working online, starting a small business, working overtime or starting a part-time job.
  • Save for Major Purchases
    If you need a new car, home or kitchen, it’s best to save in advance to finance any major purchase. Even if you can’t save all the money, you can put up a large down payment, which reduces how much you need to borrow and the associated interest charges.
  • Automate Your Payments
    You’ll never risk being caught short if you automate your payments to service debt, pay utilities, etc. The money will be deducted from your bank account, and you’ll never need to pay added interest, penalties or late charges.

Even the Best Escape Plans Can Go Badly

A famous saying attributed to many military leaders goes, “No plan ever survives contact with the enemy,” according to a report at Any plan to get out debt or save money can run up against temporary roadblocks. That’s why–when all else fails–it can be beneficial to borrow money online in an emergency. Although approval criteria are tightening for all loan products, most borrowers can still borrow money–even people with bad credit.

There are many creative ways to get out of debt, save money and strengthen your finances. The first step is to establish a budget, cut expenses and pay down debt. Find out more about when to borrow money online and when to cut expenses and pay off debt at the Personal Money Store.