Sometimes, we get into serious financial binds. Bills are due and you don’t have the money, or there’s an emergency and you need cash immediately (how to save money) to deal with it. You could be under threat of being evicted or foreclosed on. Life sometimes hits all at once and we might be tempted to turn to the easiest source of cash: payday loans. Payday loans are bad for your finances. Here are some payday loan alternatives.
Of course, most people know how bad payday loans are. They charge astronomical interest rates and demand payment (plus interest, plus fees) quickly. Many payday lenders don’t even do a credit check: they verify your employment and that’s all they need to give you the cash. Payday loans are targeted at the most vulnerable who are expected to pay dearly for their situation.
But there are better ways to get cash than payday loans, even if you have bad credit. Here are some good payday loan alternatives.
Best Payday Loan Alternatives
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Peer to Peer Lending
Peer to peer lending is a relatively new trend which was kickstarted by organizations looking to figure out how to provide funding for small businesses that cannot otherwise get funds. The way it works is that individuals put up money for others to borrow, then those funds are pooled and lent out to those who need the funds. They then pay the loan back, with interest, and the individual who lent the money gets their money back along with a percentage of the interest accrued.
Companies such as Peerform and Lending Club offer peer-to-peer loans for those who need them for a variety of purposes. They could be a good alternative to payday loans. However, your credit score will still affect the kinds of loans you can get. Interest rates tend to be high.
Credit Card Cash Advance
If you have a usable credit card, you can get a cash advance by going to an ATM and using your credit card to withdraw money.
Interest rates are slightly higher on credit card cash advances than on regular credit card purchases, and these cash advances may also have other fees associated with them. However, this is far cheaper than a payday loan. Interest rates range from 15-30%, depending on the card.
Personal Loan from a Credit Union
Large banks offer personal loans to those who qualify, but did you know that credit unions can sometimes have better interest rates and lower requirements? Many credit unions make a large amount of revenue from personal loans and will promote them heavily. You can even get special deals on personal loans if you ask!
Interest rates are lower than credit card cash advances, and personal loans may not be available to those with no credit history.
Help from Family/Friends
This might be difficult, and it’s a last resort for many, but if you’re truly in a financial bind, try calling in a favor. You might be able to get the relief you need with some help from friends or family.
Of course, don’t overuse these favors and don’t take them for granted. Other people have money problems as well, and if you don’t pay them back, it could cause problems down the road.
If you’re at the end of your rope, there are still better ways to come up with cash than a payday loan. If you owe utilities, try negotiating with the utilities company to see if you can pay your bills on a payment plan. If you owe rent, ask your landlord if you could pay at a later date.
You may also be able to refinance, consolidate, or negotiate payment plans on debts you owe. For many people, student loan refinancing is a popular way to pay less per month on student loans. If you can’t do that, try and negotiate a forbearance on outstanding loans.
Do your best to avoid turning to payday loans. In many cases, it’s better to take the hit to your credit score than to get trapped in a debt spiral with payday loans.