Alternative types of Loans to Consider


A payday loan is the best resource when you can’t find someone or you have no one to turn to when you need money. It is a short-term loan that is offered with high interests and fees. A lot of people apply for a payday loan because they have a hard time obtaining credit from other companies. Bad credit is another thing that could keep a person from getting a loan aside from a payday loan. However, payday loans can be expensive and sometimes can be the start of a debt cycle that can be hard to get away from later on.

Regardless of what you need your money for, the possibility of failing to comply with payment can be troublesome. Instead of pursuing the option of getting a payday loan, you can check on possible payday loan alternatives. These alternatives may be less expensive and could give better financial aid that can help alleviate your current state. So if you are in a situation where you need to obtain money instantly and effortlessly, you can consider these available alternatives.

 Top 6 Payday Loan Alternatives

payday loan alternatives

1. Credit Cards

One of the top alternatives is credit cards. It does not only have a lower interest rate and APR but it is also flexible which can be very advantageous. You are charged for the money you only borrowed. With a payday loan, if you need more money after your first credit, you have to apply for the 2nd loan while with credit cards, your credit is revolving which means you can use it up to your limit again.

2. Fast personal loans

A fast personal loan is another payday loan alternative which is more likely the same with credit cards that are less expensive than the payday loans. It is considered unsecured though and does not require collateral. Many of the top lenders have set up a specialized process where you can get the money directly deposited into your account at the same time or the following business day.

Personal loans have longer terms to pay back the loan which is way better than payday loans which are usually due the next few weeks or after 15 days. Their approval can be harder than with payday loans but still companies are open to working with customers who don’t have good credit.

3. Borrow From A Credit Union

For a more competitive rate on personal loans you can try to apply for a loan from a credit union which is better than banks or building societies. However getting approved for a larger loan might be difficult.

4. Get Your Salary Early

If you need money before payday, you can ask for your employer for an advance on your salary. Some banks also allow a day early release of salary from free current accounts. Although it is just an hour early in times of need it can be beneficial.

5.Borrowing From A Family

One of the best options to avoid the risk that comes with payday loans is borrowing money from your family or a friend. But you have to make sure you have made your agreement into writing, you have worked out a repayment plan or you have discussed what will be the consequences if you are late in your repayment.

6.CDFIs

Community Development Finance Institutions (CDFIs) are small agencies that provide loan options for people who have been turned down by a bank or their credit card company. It offers personalised services that reinvest whatever profits they have back into the community. They are FCA (Financial Conduct Authority) registered which is the common requirement for all organizations that offer credit to consumers. They can be found through online finance websites.

Payday Loan Alternatives To Avoid

If there are options aside from payday loans, there are also payday loan alternatives that you have to avoid.

Cash Advances

This can happen to people with credit cards wherein they can have an option to get a cash advance. Credit cards offer the advance with a unique charge and additional fee. The release of cash is instant but at a higher rate and you will have to pay a fee for the cash advance and the interest of the main amount. Remember that cash advances can be a more expensive type of loan that will need you to have paid off first.

Auto title loans

The approval for this loan is easier and the rates are more convenient so it is not a surprise that many are tempted to take this road. However, there is collateral for this type of loan, and once you default they can take your car. So this may lead to additional problems like losing the car means losing your ease in going to work, your family’s everyday trip to school, or going for groceries. This is another alternative that one should avoid due to the risk it poses in terms of your transportation.

But if you have no other choice than taking an auto title loan, just be mindful of the posed risks you are taking which is losing your car if you default on the loan. Make sure to be updated with your repayment schedule.

Conclusion

If you have a poor credit score and need emergency cash, you can check these alternatives that also come as handy as payday loans. It can be scary if you need more money to cover some unexpected costs that can lead you to find the easiest solution which oftentimes getting a payday loan. However, a payday loan is not always the answer if you need money to pay off your bills, rent, or pay back your debt to other people. Before taking that road, you have to be aware of the costs and the possible debt cycle that you may get into. 

Because payday loans can be expensive, they should only be considered in paying the essentials. Consider payday loan alternatives instead which may help you with your financial funds such as reaching out to your family, negotiating lower bills, and credit cards. You may also look into your fund’s management and if you have trouble paying for the essentials, try talking to a debt adviser. They are the best people who can help you work out your budget, know your priorities, and help you talk with your debtor for a repayment plan. You can find them for free and no need to worry about another expense.

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