Convenient Alternatives to a Payday Loan
The streamlined application process may look like a fantastic deal to take out a payday loan. But no, they may not be a great choice. The expensive nature of payday loans makes them unbearable. They are also tough to pay back. So if you’re looking for an alternative to a payday loan, there is one that might work for you. It’s called a cash advance or short term loan. These types of loans many consumers.
What makes payday loans expensive?
A very high interest rate
You might end up paying as much as 400% APR on payday loans. To avoid these high rates, ensure that you make on-time payments.
Short repayment term
About 75% of clients who have taken out payday loans cannot pay back their debts within two weeks and are thus compelled to take out an extra charge. Other smaller consumer loans have durations that are much longer.
A balloon payment
Compared to other consumer debt, payday loans are unique. Lump-sum payments can’t spread out throughout the loan period.
Extensions and rollovers
Most payday lenders’ earnings come from providing many loans to cash-strapped customers.
More than 90% of the revenue increase in the payday lending sector comes from rollovers.
More than one online lender can lend concurrently.
Applicants can get loans from lenders at the same time. Several customers find themselves caught in the “treadmill of debt.” They, therefore, end up taking out another payday loan to pay off the previous loan. As a result, the consumers end up accumulating more and more fees.
Online loans are more accessible than traditional banks. Lenders can encourage you to borrow extra money than your credit history permits, especially when it comes to payday loans. This is because the loans are easily accessible even to those with poor credit history. If the payday loan borrower cannot repay the loan, lenders may impose repeated renewal fees and increased annual interest rate.
Deferred cash disbursement procedure
Failure to pay the short-term loan option on time may result in several penalties, including late fees.
Lenders impose high fees and interest rates on the entire loan in a way that you cannot be able to sue them. This makes them among the most expensive loans.
Alternatives to payday loans
Even if your rent is late, creditors might still track you down if you’ve used payday lenders. So rather than getting into more financial hardships, here are some alternatives that you can consider:
- Get a cash advance from your employer
- Go for credit counseling services
- Apply for government assistance
- Get protection from overdrafts
- Borrow money from credit unions
- Use credit cards for cash advances
Let’s discuss some of these alternatives:
Get a cash advance from your employer
Some businesses give pay advances on their employees’ paychecks. This is real progress, and it doesn’t constitute a loan. There is no financial interest on a pay advance. This makes them a perfect alternative to payday loans.
Go for credit counseling.
If you are interested in developing a budget or devising a repayment plan, a consumer credit counseling organization can help. There are no fees, or fees are extremely minimal for these services.
Apply for government assistance
You may be eligible for different government assistance programs. These initiatives are created to aid low-income individuals who are financially challenged.
Protection from overdrafts
Many banks provide checking account overdraft protection. If you write a check and the bank moves money from your savings account into your checking account to cover it, the bank will likely pay you a $5 charge or nothing at all.
A line of credit often provides overdraft protection and generally has an APR in the range of 10 to 18 %
Financial loans from credit unions
Many credit unions give installment loans to their members. One North Carolina credit union allows employees to take out a loan at 11.75% each year. This is 30 times less than a payday loan of the typical variety.
The credit unions provide members with free educational materials and a savings program to help them regain their financial footing. Other credit unions also offer lower interest loans and rapid loan approval.
In contrast to payday loans, installment loans from a credit union provide higher monthly payments than a payday cash advance. Another feature of the mortgages they provide is that the payback time is longer, and payments may be made in installments.
Cash advances on credit cards
Unlike a typical payday loan, the interest on credit card cash advances is around 30% cheaper. If you have less than stellar credit, the credit card issuers are more inclined to deal with you. Find out whether you’re eligible for a credit line and do your homework. It would help if you also looked into secured credit cards, which offer another alternative.
Borrowing from the military
This is one of the best alternative loans to payday borrowing. Many businesses provide loans for active-duty military members and former military people. Payday loans are much more expensive, costing around 10-13 times as modest consumer loans.
Personally-arranged consumer loans
APR for short-term loans offered by small-sized consumer finance businesses can range from 40 to 60 percent. Due to their costs, these loans are a better alternative to payday loans. However, they require some effort and planning.
These short term loans are typically used when someone needs money quickly. The annual percentage rate is high, but the cost is not as high as a payday loan. Personal loans come in various types, including fixed-rate personal loans, variable-rate personal loans, and installment loans. People with bad credit can also qualify.
Payday Loans: A Bad Idea?
Have trouble paying back those bills before the next paycheck? Here’s what you need to know about payday loans.
Frequently asked questions
How Do I Get Out Of Debt?
You don’t want to get yourself into debt. But if you’re already there, how do you get out? It might seem like a daunting task, but we’ve got some tips to help you manage your finances so you can start living a life free of debt once again.
Are payday loans better than loans provided by credit unions?
A credit union is a nonprofit organization that helps consumers build wealth through low-cost banking services. Generally, federal credit unions offer loans at more affordable rates than payday loans. Therefore, they can be a good payday alternative to go for, especially if you have bad credit. Credit unions offer competitive rates and flexible terms. They are regulated by federal law and supervised by the National Credit Union Administration (NCUA).
What is the loan term for a payday loan?
The average loan term of these small-dollar loans is usually between two weeks and three months. However, the loan term usually depends on the online lender, among other factors. Traditional payday loans tend to have longer-term than online options. Paying your loan on time can help reduce the loan term and chances of rollovers.
Do payday lenders report loan payments to the major credit bureaus?
Yes, all payday lenders must report any payment made to the three major credit reporting agencies: Experian, Equifax, and TransUnion. This information will appear on your credit reports. Making timely payments can therefore improve your credit score.
Are there credit checks for small, short term loans?
No, there are no credit checks required for these emergency loans. Loan eligibility depends on other factors, not just good credit history. Some lenders may perform an investigation to determine your ability to repay the loan. You only need to submit the required documents, sign the loan agreement and get your money via direct deposit.
What are the differences between payday loans and title loans?
Payday loans and title loans do not work the same way. Title loans are a form of short-term financing where a borrower uses their vehicle as collateral to secure a cash advance. The amount borrowed for title loans depends on the value of the car. The interest rate charged is higher than a typical payday loan.
How much does it cost to borrow $500 from a payday loan company?
0 is the maximum amount that most companies allow their customers to borrow. The actual cost of lending
Payday loans vs. credit cards
Payday loans and credit card debt are different types of financial obligations. Payday loans are short high interest loans designed to provide quick access to funds when you need them. At the same time, loans from a credit card company are used to pay off debts over time. So if you are having trouble with payday loans, then a credit card can be an alternative.
Do the loans have an application fee?
These types of loans have no upfront fees. However, some companies charge a one-time processing fee. This fee varies depending on the type of loan you choose.
What is the maximum interest rate for payday loans?
The maximum interest rate for a payday loan is around 300%. This means that if you fail to make the repayment within 14 days, you could end up owing hundreds of dollars in additional charges.
Can I apply for a payday loan online?
You can apply for a payday loan using our website? We also have a mobile app available for both android and iPhone users.
- lending agreement
- income sources
- regular income
- source of income
- additional cost
- online application
- financing option
- regular pay schedule
- valid identification