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Summary

High-rate loans prey on consumers in a cash crunch, but there are usually good alternatives that will help you survive the crisis and keep more of your money in your pocket. You should also be wary of cosigning a loan or lending money to family or friends.

Credit Limits

  • Don't start the short-term loan cycle. Payday and other short-term lenders like to argue that they're providing a popular “service” to cash-strapped borrowers. But the price borrowers pay to be serviced is simply too high. There are always other alternatives, including simply doing without the cash.

  • Consider your alternatives. Cutting spending, raising extra cash, and negotiating with your creditors are better solutions than most high-rate loans.

  • If you're the lender rather than the borrower, consider the worst-case scenario. If you cosign a loan, late payments and defaults will show up on your credit report. If you do lend a friend or family member money, you should be prepared not to be repaid.


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