by Matthew Marcus

Created on: June 06, 2008   Last Updated: June 19, 2008

You are standing on the side of the road watching the smoke come out from under the hood of your car, and you are wondering if your boss will fire you because you no longer have a means of transportation that can get you to work on time. You need cash to fix your car, or a loan to replace it quickly.

This is just one of many every day scenarios that can leave people in a situation where they "need" to raise cash right away. Any time where a person is in need of something, their negotiating position is weak, and too often they find themselves victims of businesses that profit from people who are short on cash, namely; predatory lenders, unsecured loans, credit cards, pawn shops, and get rich quick schemes.

Predatory lenders are usually businesses that will loan you money based on projected future income, such as a paycheck or tax refund. Such lenders will take an enormous cut, as much as 25% of your expected income. This is a bad deal, because the in addition to the fee being high, the time until your next payday is also extended. These factors increase the likelihood of creating a cycle where the loan becomes a necessity each paycheck, and you "giving" 25% of your earnings to the lender.

Unsecured loans and credit cards may not be quite as bad if they are properly managed. However, if you cannot pay off the amount of the loan or credit card debt at the end of the month, you will be paying finance charges to the bank, which takes money out of your pocket, and could create the need for you to borrow even more money in the future. This also creates a scenario where you are "donating" a percentage of your earnings to the bank.

Another way of generating cash is selling your possessions. Pawn shops make money by selling items for significantly more than what they paid for them. They usually pay less than the replacement value of the item, so if you find yourself at a pawn-shop, you are essentially being robbed. Craigslist is free, by the way, so if you have something that you legitimately want to get rid of, try selling it that way.

The worst case scenario is when people who are short on cash try to be proactive by working on a "new business" that will solve their money problems over-night. Get rich quick schemes are usually work for the person that convinces you to try them. Most often there is an up-front investment on your part. The person that collects that investment from you is the person who is getting rich. You however will not. Once again the money that you have spent will now leave you further behind and more in "need"

If you have already found yourself in need, and are suffering the consequences of relying on these types of "help" to get through a cash crunch, there are many non-profit organizations that can help you to negotiate better rates and create an exit strategy. If you are in a position where you feel compelled to resort to these measures, take a step back and try to think of other options. Sometimes you really can do without for another few weeks. Consider taking a loan from a family member or friend that will not charge you interest. Don't be afraid to ask for help from other people in your life, most of them have been in your shoes.

If you are in debt now, or just living paycheck to paycheck, the key is that you will need to create a realistic budget for yourself, and will likely have to make changes in the way that you live in order to pay-off your debts or to avoid situations where you will need to put yourself into debt.

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