Whenever I am in a financial fix, I try my utmost not to take loans. I have learnt over time that even if you take an interest free loan, shrewd creditor will not let you off the hook. They have to factor in inflation and you are bound to pay a higher amount than you were originally intended. To avoid costs associated with loans, I look for alternative methods like notable asset disposal or contract selling of the items I wanted to purchase on behalf of someone else and them get to keep a commission. The most cost effective loan I am going to consider is the Kiva loan.
Loans are needed every once in a while and there is a cost to borrow some one's money to help you over the hump. Paying it back as fast as possible is a good way to make the cost as cheap as possible.
If you need a loan then I suppose to avoid paying interest first you should try to find out if any of your friends or family can lend you the money. A friend mine told me someone loaned him $50,000 and he's yet to pay back the money though as per the agreement they had, by now he should have paid it all back. Since friends or family can understand if you fail to pay back what you owe in time, you shouldn't get a loan before you find out if they can't help you.
Many people are now opting to take a loan when they run into difficulties, and as you have suggested they would prefer to opt for disposing of assets to satisfy their need if possible. Many people have become terrified of the loan acquisition process, so they will try all that is possible avoid having to get one.
It all depends. Are you good with finances? Are you good at returning money? Your credit score lets lenders know if you are good at those things. And you should know by now too. Some things are necessary, for example, you can't live without a working car, but you don't need to buy a ferrari to get to work either. You can't live without a proper home once you have a family, but you can't claim that a gigantic house is what you really need. Half the time, the reason why people get into debt is for the wrong reasons. Get into debt for the right reasons. Don't go for that crazy expensive arts course in college, go for the professional one that will get you a job. And once you get a job, get a credit card, but then create a virtual one using that card with a lower limit, so you don't go bust. I am going back to school soon. The first 6 months are going to cost me $450. And this is a top x US business school. My earnings are going to shoot up by a massive 4-5 times if you think about the average salary, joining bonus, and everything. I am a few years late, but I waited till someone offered me a scholarship and all. I am going to have to take some amount of loan for the other 18 months, but my ROI is 100% within 2 years. While my friends will pay down their education loans for 8-10 years, I will likely pay down the thing (even if I am lazy within 2-3 years). I wish someone would give me the other money too because I really am a "working poor" person. But, my life's going to change because I chose not to get into massive debt.
You have to be careful when borrowing or lending to family and friends. My family does it quite frequently, but we are all very close and understand each others financial situations. We know who has money and who dosn't. We also know when everyone gets payed and what major Items they are purchasing. This helps when borrowing because we know when some one can legitimately not pay you back, and when they are just blowing their money on silly things.That being said, there are a couple of rules you should stick too. The most important being NEVER loan more than you can afford to lose. If you might need that money in a month, DON'T give it to anyone. Enter into the exchange thinking you will not get the money back.
I have also come to observe that the interest charged on a loan is not necessarily the Achilles heel when it comes to servicing it. The real problem is the principle which constitutes the bulk of the loan. One should only acquire a bank loan if they are confident that the ROI on their investment is going to cover it and suit their unique circumstances. Informal capital acquisition platforms like merry go rounds are cheaper alternatives. In addition, they save on processing costs.
I do think credit cards are no different from loans and you can actually override the interest part if you pay more than your required minimum payment every month. You can't do this when you take a loan out from creditors. For instance, if you have to pay $50 a month, pay $60. The bank will not gain anything if you do this.
