7 alternative solutions to bank borrowing

7 alternative solutions to bank borrowing

7 alternative solutions to bank borrowing

In a step that precedes borrowing from banks, experts advise to search for other alternative solutions to borrowing from less expensive sources and to resort to them when needed in order to obtain cash liquidity to meet emergency situations.

The decision to borrow can also be postponed for a week or more, which may make the person wishing to borrow reconsider his decision, especially if it is for a consumer purpose such as buying a car or luxury goods.

Financial experts advise those wishing to borrow to secure financial liquidity to follow solutions that should precede the process of borrowing from banks to obtain this liquidity:

Better alternatives and solutions than borrowing

1- Following a future financial plan that includes saving for the future and facing emergencies, so that future liquidity will be available that will dispense with borrowing from banks.

2- Rationalizing expenditures as much as possible, deducting a monthly sum of money for savings or investment, while working to stay away from consumer spending in excess of need.

3- Postponing or canceling the purpose for which the borrowing is being made, especially if it is for consumption goals. For example, travel abroad can be postponed if it will take place through borrowing, until self-financial resources are procured.

4- Gathering liquidity from sources that are less costly than borrowing from banks, such as creating a cooperative financial system with colleagues and acquaintances (the association), so that cash amounts can be obtained at once, then paid in monthly installments later without interest.

5- Benefit from the systems provided by banks for the flexible payment plan through purchases by credit cards, which allow the purchase price to be paid in monthly installments for a period of up to a year without incurring interest.

6- If the purpose of the borrowing is to purchase a real estate unit in the resident’s home in the country, he can search for real estate companies in his home country that allow paying the price of the unit in installments over a certain number of years without interest.

7- Postponing borrowing for investment purposes, such as borrowing for investing in stocks until self-resources are managed, and so that the return achieved from the investment is not less than the cost of interest, burdens and fees of the loan.

Borrowing prevention

Knowing the consequences of borrowing and studying its negative effects, in the event of an inability to repay, may make many people back down from the decision to borrow before taking it. In the sense that the one who wants to borrow should study the burdens that will result from the decision to borrow and the time period for it, and the extent of its impact on his income.

It is considered to organize an early plan for saving and investment, so that people can provide liquidity or achieve a return that will enable them to borrow in the future to manage emergency expenses. This is done by saving part of the monthly income by deducting from the salary to buy savings products provided by banks or in an investment account, and the percentage should start with saving part of the salary within the limits of 10%, then gradually increase the percentage.

One of the best preventive measures against falling into the trap of borrowing is to train oneself to be content and not look at what others have, in addition to managing basic needs according to the monthly income, and changing the perception of money as a means and not an end.

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