Payday loans are loved and hated in equal measure. They provide quick and easy cash that may rescue you from a financial fix. However, the high-interest rate, application fees, and short payment period make them dangerous. Even the smallest amount of a payday loan may be the beginning of your endless debt cycle that will take a lot of financial sacrifices to break free.
So how about we look at seven payday loan alternatives to help you avoid falling into the payday loan debt circus.
Payday loan alternatives
The following alternatives will save you from the not-so-good payday loans:
Payday alternative loan (PAL)
You can apply for an alternative loan from a federal credit union. The loan amount is normally larger than the payday and comes with a lower interest rate. Moreover, the payment period is longer, usually between one and twelve months.
A credit union can provide up to $2000 and an interest that does not exceed 28%,hence offering a better deal than the exorbitant payday loans.
Help from family and friends
When in a financial crisis, avoid rushing to payday loan lenders when you have friends and family who can lend you the money at no or low interest. Ask your close friends, co-workers, and family to give you a loan. You can formulate a payment plan and the interest rate. Although this might hurt your ego or pride, it will save you from the glaring dangers of a payday loan.
You can create a lending circle with people you trust, such as workmates, churchmates, community members, and neighbors. In a lending circle, every member contributes a certain amount of money, and one of the members takes the sum of all that money.
In case of emergencies or financial distress, your lending friends can give you the money to solve the problem. You might even join online lending circles that report the contributions to credit bureaus, thus boosting your credit score.
Cash advance from your salary
Sometimes, you can fix your money emergencies with a cash advance from your salary or wage. Talk to your employer and ask them to offer you an advance to cater for an emergency. The good thing about a cash advance from your boss is that it is not a loan, so there are no fees or interests.
Therefore, it is one of the cheapest ways to tackle a financial crisis without getting trapped on a payday loan.
Borrow a bad credit loan
A bad credit loan is a particular type of loan that certain lenders give to borrowers with a FICO credit score between 580 and 690.These lenders look at your debt to income ratio and your payment history to determine if you qualify for the loan.
A lender may also offer you a loan even with a credit score less than 580, but with the help of a co-borrower or a co-signer. As for the interest rate, bad credit loans have much lower interests than payday loans, so they are far better.
Negotiate with providers for flexible payment plans
Unlike what most people think, most Americans don’t use payday loans for emergencies only. Some households survive on payday loans to offset electricity, gas, water, and grocery shopping bills. If you are short on finances and are looking for ways to survive until the next paycheck, you can negotiate with some providers for a flexible payment plan.
Get extra streams of income
Instead of relying on costly payday loans, fatten your bank account by getting a part-time job, taking extra working hours at work, selling stuff online, or turning a hobby into a sellable service or product. These activities will boost your finances and enable you to settle your bills comfortably.
Payday loans are dangerous because they charge exorbitant interest rates and trap borrowers into a debt cycle. They should be the last resort after trying other cheaper alternatives. These alternatives include bad credit loans, payday alternative loans from credit unions, asking for help from family, forming a lending circle, and negotiating with providers for flexible payment plans. Somewhere you can also find payday loan consolidation service for eliminating the payday loans.