Forget plastic! 3 alternatives to pay for an unexpected expense
Whether it’s a car repair or unusually high utility bill, we’ve all probably experienced that dreaded moment when an out of the blue expense arises.
While your first call of action may be to turn to that plastic in your pocket, when you consider the average credit card rate in our database is 17.41%, it may not be the thriftiest option if you can’t repay the amount in full by the due date.
Instead, we’ve come up with these three much more budget-friendly alternatives that will help you steer through this financial hiccup without the bite of high credit card charges.
1. Dip into your savings
We know you’ve probably been saving that cash in your savings account for something more exciting like that beach holiday to Bali but you’re far better off using your savings to pay for that unexpected expense than your plastic. Just take this example:
Say you need $2,000 to cover the costs of a root canal. If you charged that to the average credit card and it took you 11 months to repay you’d pay $177 in interest. Whereas if you dipped into your savings, you would pay nada in charges and could put that cash towards Bintangs by the pool!
2. Low cost personal loan
Don’t have money stashed away in a savings account? No worries, as there’s another affordable option to whipping out your credit card - a personal loan with a low interest rate attached. At the moment the cheapest secured personal loan in our database has a rate of just 5.99%, which is significantly lower than the average credit card rate mentioned above.
Want proof of how much this low rate could save you? Well if we use the example of a borrower needing $5,000 to cover the cost of significant car repairs, they would save $639 in interest if they repaid that amount over a 2 year period.
3. Take on extra work
Of course, there is an alternative to dipping into your savings and drawing on a personal loan to cover your unexpected expense; all you need to do is look outside the box for extra work on the side.
One of the major perks of the online world is there are now plenty of platforms like airtasker.com, gumtree.com.au and sydneyfocusgroups.com.au where you can offer your services for cold hard cash. For instance, if you’re willing to partake in a market focus group you could get paid anywhere between $80 and $150 per session and the best part is many of these market research groups are run at night.
How will you avoid the bite of plastic to pay for your unexpected expense?