No such thing as free cash

BAD OPTION: Pawnshops are also a form of rarely friendly loan transactions.
BAD OPTION: Pawnshops are also a form of rarely friendly loan transactions.

LOOKING for extra cash? Many services promise extra cash, but remember, there's no such thing as a free lunch.

Believing in promises of free cash will put you deeper into financial misery than you already are. Jobs are lost, salaries are frozen and the housing and stock markets are running lower than they have in years. If you've been tempted, read on, to get your wits back about you.

  • Pay day loans seem like a fantastic idea. They're non-invasive, and within minutes you can walk out with cash based on your pay.

It does not sound that bad: You can borrow today and pay it back with a little extra cash next week when you get paid . But in reality, most people that go down this path just keep rolling the amount over again and again. Everything's great until lenders change their mind about advancing the money. You are left with an empty wallet and perhaps hundreds, or even thousands of rands in interest charges and administrative fees.

Pay day or cash advance loan companies charge very high interest rates. If this is truly your only option, you would be better off borrowing from family or even asking your employer for an advance on your next salary.

  • Historically, tapping into your home loan has been a great funding source, but over-leveraged home values were what got the US into the mess Americans are in today. To compound problems, banks are tightening the amount they are willing to lend you and will likely vouch for a lower appraisal amount to shorten the pot.

Homeloans or lines of credit often also come with high upfront fees. These are often rolled back into the entire loan balance, which means you could be paying interest on the fees for the duration of the loan and further reducing your equity and your ability to pay down the principal balance. If you are investing the money back into your home for improvements, it's okay to get a homeloan, but if you are doing it to pay bills, avoid this approach entirely.

  • Most people do not look at a pawnshop as a loan transaction, but that's exactly what it is. If you need cash, the pawnshop owner will take what you have and give you a ticket and some cash. The cash provided is far less than what the item is worth and interest is charged on the amount given to you. The rates are rarely friendly.

If you default or show up even one day late, the pawnshop will sell your item for whatever price it wishes, usually the retail price or close to it. If you want it back, you have to pay the full retail price. -