Inflation Hitting You Hard? Whatever You Do, Don't Make This Mistake

This common strategy will seriously cost you in the long run.

Paying the bills is never fun, but it's been extra painful lately with inflation driving up the cost of everything. When your finances are already strained to the breaking point, it's natural to look for any way to bring in extra cash. But you need to be careful. There's one "solution" that could make your financial situation even worse over time.

Cash now isn't worth massive debt later

Borrowing money can get you the cash you need quickly, but you always need to be aware of the repayment terms for your loan. This includes how soon you'll be expected to repay the loan and what your monthly payments will be. The latter depends on how much you borrow and the loan's annual percentage rate (APR). A higher APR means you'll pay more in interest.

APRs vary based on your credit score and the type of loan. Mortgages typically have a low APR, while unsecured debt -- debt without collateral the creditor can confiscate if you fail to make your payments -- typically has higher APRs. Credit cards usually have rates between 10% and 30%, but even that looks affordable next to payday loans.

These short-term loans offer the promise of quick cash and often have repayment terms lasting just a few weeks. They're pretty easy for most people to get, and that can make them appealing to those who need money right away. But their APRs can be as high as 400%.

To give you some idea of what this means for you, if you had a $500 payday loan with a 400% APR and a one-month repayment term, you'd owe $667 at the end of that month. And if you can't pay it back, you may decide to roll the loan over for another month to buy yourself some time. Except at the end of the second month, you'll owe $823. And by the end of three months, you'll owe $993. By the end of a year, your debt will be $2,500 if you're unable to pay any of it back.

A lot of people find it extremely difficult to dig themselves out of this cycle once they get into it, so they go on accumulating more and more debt. That just makes it even more difficult to pay for their living expenses, which they were already struggling with in the first place.

But that doesn't have to happen. There are other strategies you can use to get the money you need that don't have these consequences.

Better ways to get the money you need

It's best to look for ways to boost your income first before you take on debt to help you pay your bills. You might consider working overtime or negotiating a pay raise with your employer. You could also look for a better-paying job elsewhere or start a side hustle.

If that's not feasible, you might try reducing your expenses. This could be as simple as cutting back on unnecessary purchases or as extreme as moving to a more affordable location.

When that's not enough, look for more affordable ways to borrow money. Personal loans can help you get the money you need and they don't require any collateral. They have higher APRs than mortgages or auto loans, but they're much more affordable than payday loans, especially for those who have good credit. You can also borrow more than you can with a payday loan, and you'll have more time to pay it back.

It's best to compare rates from a few lenders before you choose one. Look at their repayment terms and APRs to see which offers you the best deal. Then, borrow only as much as you have to, and be sure to build the monthly payments into your budget so you can stay on top of them.