Probably the most critical step to getting out of debt is to quit borrowing. That means you NEED to find alternatives to loans.
That said, the idea of turning to debt for help is so pervasive that it can be hard to even think of other options. Borrowing money feels like the default solution, especially when you’re stressed out and worried.
So it’s common to try every way you can think of to borrow more: even things like trying to get personal loans from strangers or borrowing money from people online.
But there ARE other choices out there, and many of them are a whole lot easier than you think. Here are 5 alternatives to loans:
1. Say “not right now” or “not yet”.
Many of the things we think we “have” to borrow money for aren’t true “must haves”. They’re just things we’d really, REALLY prefer to have or are used to having.
For example, suppose your AC or heat breaks down, and you don’t have the money to repair yet. Unless your 90 year old grandma lives with you and you have absolutely nowhere else for her to stay temporarily, you can probably just grin and bear it until you’ve got the money. (And this is coming from someone whose AC keeled over one Arizona summer while she was pregnant. I spent a lot of time at the library and at work.) Yes, it will be uncomfortable. But the pioneers did it, and at least it’s not debt.
This idea applies to other things too. If it’s easier, you can turn “not right now” into “Sure, as soon as we save up the money.” Which leads me to…
2. Make more money.
The way to do things without borrowing money is to have the cash available. Cash flowing things is the biggest alternative to taking out a loan there is.
So where do you get the money you need?
It could mean going out and earning more money on the side, asking for a raise in your current job, paying gradually as you go for things (such as by working your way through college), selling stuff you no longer need to get cash, or a combination of the above.
I know it can feel hard to figure out how to bring in more money or cashflow things when you’re doing the best you can right now. But it’s almost always possible, with some creativity. I’ve met someone that was completely paralyzed who figured out how to do it. Chances are you can too. Every little bit helps.
For example, here are some ideas. (Links are referral links.) Babysitting could earn you an extra $6-$20 an hour, depending on typical rates in your area. Watching a pet in your home could pay $35 a day. Or maybe you could offer up a room on AirBnB. (There’s a whole list of ideas in this book if you’re looking for more suggestions.)
This is definitely one of the best alternatives to loans.
3. Ask questions to find alternatives to loans.
Say you’ve just been told that it will cost $8000+ to repair your car. But you’ve only got $3,500. (This actually happened to me.)
Try literally saying things like “I really want to do this, but I don’t have that kind of money. What’s the bare minimum it would take?” or “How can we keep costs down to something I can afford?”. (Just remember to state “Oh, I don’t borrow money anymore. I’m working to get out of debt.” if they offer financing as an alternative.)
You could also ask what the consequences will be of delaying or skipping whatever it is, how much it might cost to do it yourself, or if there are any local agencies that might help you out.
Ask your questions multiple ways, because you might get different answers depending on how you ask.
Finally, don’t forget to ask more than one person and to be persistent. You’re likely to get different quotes and different answers as you talk to multiple people.
Whatever the situation, asking questions is usually a great way to create alternatives to loans AND to save yourself money. It can totally enable you to accomplish your goal without borrowing.
4. Say no.
Of course you really want to do whatever it is.
You want to get rid of those horrible fake butcher block counter tops from the 70s, tell your child they can go on that trip, or attend your loved one’s funeral.
But remember that MORE than that, you want to get out of debt.
So say no. The counters will still be there for you to rip out later, your child won’t remember the missed trip 20 years from now, and your loved one will understand. They wouldn’t want you to borrow to attend their funeral.
I know saying no can be hard at times, so here are some ways to make it easier to say no.
5. When you’re really stumped, lean on others.
Many people are glad to help out with time, effort, skills, tools, pointers, ideas, and even supplies. People like your family, friends, neighbors, coworkers, acquaintances, and sometimes even strangers. But you won’t know whether or not they can help unless you ask.
If you feel uncomfortable directly asking someone you know for help, go the indirect route instead: “Do you know anyone who might be willing to help me with ______?” or “Do you have any ideas about how I could solve this problem?”. You might be surprised at the answers you get.
This is hard to do for many people, myself included, but try thinking of it as an opportunity to grow. Remember that people like to help. And of course you can pay it forward when someone else needs help in the future.
Why finding alternatives to loans matters
Actively seeking out ways to avoid loans (especially payday loans!) can completely change your life. It can reduce stress and give you more opportunities. And of course only spending money you already have is key to becoming debt free!