10 Affordable Alternatives to Payday Loans

10 Affordable Alternatives to Payday Loans

If you need cash quickly, it may be tempting to take out a Payday loan. It can feel like you have no other options, but there are other options available if you need to get your hands on cash quickly. Payday loans come with an array of issues that can lead to more money problems in the future. With high interest rates, and expensive fees, Payday loans are not always the best solution when you are in pinch for money.

They can be easily deferred, adding to the cost of the loan making it nearly impossible to pay back without owing much more than your paycheck allows. For those who need a short-term loan, choosing the Payday loan option can quickly become a vicious cycle of constantly owing money.  Fortunately, there are other options available that can also provide you with the cash you need on a short-term basis. We have put together a list of alternative options to Payday loans.

Option 1: Using Existing Credit Cards

Payday Loans

For many people, credit cards are often their last resort when it comes to borrowing the funds needed to get cash quickly. But, if you find yourself in need of cash quickly, utilizing your existing credit cards can be a better option than choosing a Payday loan. If you have more than one credit card, choosing the one with the lowest interest rate is always the best option when you need short-term funding. Establish a payment plan that fits into your budget before you decide to use your credit card.

Depending on the type of credit card you currently have, you may want to look into balance transfers or opening a new card with a low introductory rate that offers a low interest rate. Look into your options to know what will be the best value for your budget. Keep in mind that applying for a new credit card means including your current monthly credit card payments into your monthly budget.

Another option that you can utilize with an existing credit card is requesting a larger credit amount. Extending your credit limit on existing credit card accounts can help you gain the funds you need quickly, often with just a quick phone call to the credit card company. If you have a good payment history and a good to fair credit rating, this option can be exactly what you need. Often within 48 hours you will have the credit and funds you need rather than applying for a PayDay loan.

Requesting a loan from a family member or a friend is another way to avoid a Payday loan. Depending on your situation, a money transfer is a more affordable option to obtaining the funds you need quickly. A family member or friend who is willing to loan you money can easily transfer into your bank account.  Money transfer do come standard with a fee, but it is much less than your typical PayDay loan interest rate, making this option a much more valid way to obtain short-term funds. Make sure to discuss your repayment options with your family member or friend when requesting a personal loan and money transfer. This will ensure you are appreciative of their help, and allows for you to have a good budget in place for repayment.

Option 2: Authorized Overdrafts

If your bank offers authorized overdrafts on your checking account, chances are you can use the overdraft amount in a pinch. If you are unsure if your bank offers the overdraft protection and option for checking accounts, before you consider a Payday loan try your bank first. Overdraft is not always the best option, but if you are in need of cash immediately, you will be able to overdraw from your account based on a set limit by your bank. This limit depends on your credit rating, your relationship with the bank and the ability to repay the overdraft amount.

If you have this in place, you will not be charged a fee to use the money, but you are responsible for paying it back. If you do not have this overdraft protection in place and you choose to overdraft your account, you will pay for it in the end with hefty fees and additional charges. This option is not always the best, and may not work for everyone, but it is an option available to you in case of an emergency. Speaking with your bank will help you find out if you qualify for overdraft funds.

Option 3: Apply for an Unsecured Loan

If you find yourself in a situation where you need to borrow a larger amount of money quickly, an unsecured loan is another option rather than the Payday route. Repayment is based on your credit rating, history and ability to repay the loan over the dedicated amount of time established before you receive the loan. An unsecured loan means your interest rate can vary throughout the life of the loan, which also means you may end up owing the lender more in the end, but an unsecured loan can be a much more viable option compared to the high costs of a Payday loan.

Check out our: 9 Top Tips For You On How to Get A Personal Loan!!!

Make sure to keep the interest rate in mind when applying for an unsecured loan, this way you can make payments based on the loan terms. An unsecured loan can be done in as little as 48 hours. You will also need to ensure you have the ability to make your payments on-time, and within the time frame specified on the loan.

Option 4: Social Lenders

Payday Loans

Social lenders have become an increasingly popular option for people who need money fast. They tend to offer rates that are much more reasonable than an unsecured loan, and exceptionally better than Payday loans. Social lending is the term used for lending options that cut out the bank and you borrow directly from a peer to peer structure. By using a social lending site to borrow money, you will be matched with a lender that meets your needs and the loan is then given directly.

Often social lending options will come with a lower interest rate than other personal loan options available through large bank chains. This may sound the best option to borrow money, so why isn’t everyone doing it? There are some risks involved with social lending. Many of the risks revolve around default loans, which in turn jack up the interest rate for everyone else. Moreover, if you don’t have great credit, you may have a difficult time finding a social lender who will borrow you the funds you need, or if they do borrow you money it will come with a higher interest rate. If you choose to work with a social lender, make sure that you have the ability to make payments on time and monthly.

Option 5: Ask for Help from Family or Friends

Of course this option sounds like it should be your last resort, but reaching out to family or friends can be an option for those who need funds quickly. This option depends on whether or not your family or friends have the assets to borrow you funds and whether or not you feel comfortable asking to borrow money. Reaching out to family or friends in your time of need can be a much better option for you, especially if you are already short on cash. Often family members will forgo interest, but this also depends on the level of generosity they provide you.

Another element is to establish all the details ahead of time, such as if there is an interest rate how much, and repayment terms.

Option 6: Ask for an Advance at Work

Many people will have the ability to ask for an advance through an employer. Rather than borrowing money with a Payday loan, with the emphasis on getting you by until payday, speaking with your boss or human resources personnel can be a viable option for those who need cash quickly. Explaining to your superiors why you need the funds is a great way to figure out if they can potentially assist you with a quick option for money. In this case, asking for an advance may be something that your employer offers, and finding out what your options are before getting a Payday loan can make a huge difference to your bottom line.

Option 7: Seek a Credit Union

A credit union is a non-profit banking and lending institution that is set up to provide members with lending options. Credit Unions are an affordable option compared to the larger bank chains because they keep their interest rates down to meet the needs of their members while providing an affordable loan option. Credit Unions keep their members best interest in mind with all their banking decisions. This means that if you have a poor or shabby credit score, you may not be eligible. The only way to find out is to become a member and apply for a personal loan. Another element that should be considered a bonus with a credit union is their interest rate is at 3% a month which is significantly less than a Payday loan.

Option 8: Budgeting Loans

For those who are in need of funding but are having a difficult time finding alternative funding options, applying for a budgeting loan may be a good way to make ends meet. Budgeting loans are interest free loans provided by the government that are specifically designed to pay for essentials with income related benefits. To qualify for a budgeting loan, either yourself or a partner should have applied for and received Income Support, income-based Job seeker’s Allowance, income-related Employment and Support, or Pensions Credit for a minimum of 26 weeks.

The amount you are allowed to borrow depends on your ability to make payments on time and within the scope of the loan. Additional items that are considered is how much savings you currently have, how many children you have and if you owe money to the Social Fund.  Budgeting loans are meant to help those who need funding for necessities such as rent, food, clothing, furniture or funeral expenses. A typical budgeting loan is 2 years for repayment length.

Option 9: A Guarantor Loan

If you have shabby credit, it is possible to still find funding through a guarantor loan. This can be an affordable solution if you need funding quickly, but cannot gain money from other lending options. A guarantor loan is a loan given to individuals that is backed by someone who will be responsible for the loan amount if you go into default. The person who is guaranteeing the loan will need to have decent credit and the ability to make the payments if you cannot. However, they are not expected to make payments or be involved in the loan process, they only help you gain access to a loan.

Option 10: Don’t Borrow Anything

Before you set out to borrow any money from any of our options we have listed you should make certain that borrowing money is an absolute necessity. Do you need it for a vacation, or to pay off a student loan debt? Deciding whether or not you need to borrow money should be your most important aspect of the lending process. Budgeting is much better than borrowing. If you are unsure whether or not you should take out a loan, make sure it is for something that is worthy of the debt you incur.

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10 Affordable Alternatives to Payday Loans
If you need cash quickly, it may be tempting to take out a Payday loan. We present to you 10 Affordable Alternatives to Payday Loans. Don`t Miss Them!
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Warning: Late repayment can cause you serious money problems. For help, go to moneyadviceservice.org.uk