In times of crisis, when reality shifts rapidly, many people feel an urgent need for a quick solution. A loan can seem like the most accessible, simple, and immediate answer. But even in challenging situations, it’s essential to know what not to do—so you don’t end up in a financial hole that’s hard to climb out of later.
Before you sign anything, here are key pitfalls to avoid:
Don’t Take a Loan Without Asking: Do I Really Need It?
Many people rush to take a loan simply because their bank account is low—without exploring alternatives:
- Do you have savings you can use instead?
- Can the expense be delayed or replaced with a cheaper option?
- Is there a family member who can help temporarily?
Even just a short delay—two or three days—can help relieve the initial panic and reveal that a loan might not be necessary after all.
Don’t Borrow More “Just in Case”
In uncertain times, there’s a tendency to take out an oversized loan to “cover all possible scenarios.” In reality, this is a trap:
- A larger loan = higher monthly payments = greater financial risk.
Instead, make a precise list of your urgent needs, add a small buffer (up to 20%), and stick to that amount. No more.
Don’t Settle for the First Loan Offer
Even in an emergency, don’t sign anything before comparing options. In many cases, the difference between offers can amount to hundreds or even thousands of shekels.
Be sure to compare:
- Annual interest rate (APR)
- Origination fees
- Early repayment penalties
- Total cost of the loan
Also consider alternatives such as loans from provident funds, family members, or community lending funds (Gma”chim)—which may offer far better terms.
Don’t Ignore the Question: Can I Afford the Repayments?
Carefully assess your monthly repayment capacity. Take into account:
- Potential decrease in income
- Expected increase in fixed expenses
- Other existing financial obligations
If you’re not confident you can meet the payments—this is not the right loan for you.
Don’t Fall Into Overdraft Instead of Taking a Structured Loan
An overdraft is essentially an unregulated loan—and it’s extremely expensive.
If you’re already deep into overdraft, ask your bank for a structured loan with better terms, or explore temporary alternatives (like payment deferrals) until you stabilize your financial situation.
Don’t Forget to Check Whether Existing Payments Can Be Deferred
Before committing to a new loan, check whether you can defer current obligations:
- Mortgage
- Other existing loans
- Standing orders
- Postdated checks
This type of deferral may provide short-term relief—without creating new debt. Just make sure to ask about any associated costs (interest, fees, penalties, etc.).
In Summary
The current crisis may push us toward impulsive decisions—but this is precisely the time to think clearly.
A loan can be a solution—but only as a last resort, and only if handled wisely and responsibly.
If you’re feeling overwhelmed, don’t go it alone. Free financial counseling is available at Paamonim. We offer professional guidance to help you make the right choices—even during difficult times.
