More Practical Alternatives to Payday Loans
Most people have experienced the scenario of the car breaking down, the fridge not working, the water heater malfunctioning and the air-conditioner going on the blink – all at the same time. This usually means that you will need to get your hands on a lump sum of cash in a hurry. While there may be many options regarding how you can do this, it’s important to bear in mind that some borrowing options are better than others. Although payday loans are usually extremely easy to obtain, this is often not the best way to obtain extra cash. Below are a few better and more practical alternatives.
1. Join a Credit Union
A credit union is classified as a community loans and savings group. Members of the union have the ability to apply for secured and unsecured loans or save money. A distinct advantage of credit unions is that they can often be repaid over a longer timeframe than payday loans – even up to ten years in some instances.
The amount of credit unions is steadily increasing and the types of services and interest rates offered by them will vary from one to another. However, it is worth finding out if there is one available close to you so that you can apply for membership or even a fixed rate loan of sorts before resorting to any type of payday loan.
2. Employer Advances
If you happen to have an understanding employer or one that offers advances on wages, it could be worth asking if this option can be utilised. Your employer will provide you with a predetermined amount of money, which will then be deducted from your full wage at the end of the week or month. Even if your employer is not able to provide you with an advance, it doesn’t hurt to ask – especially if it could result in you being able to avoid using a payday loan that will result in severe financial hardship at a later stage.
3. Apply for an Overdraft Extension
If you have run into financial difficulties and it’s still going to be a short while before you receive your next wages, it may be viable to speak with your bank regarding extending your overdraft with them. This will provide you with a financial safety net, while also ensuring that you do not exceed your limits. In many cases, overdrafts can be agreed upon for up to 12 months at a time. Although you will still pay interest on an overdraft extension, it will not be nearly as much as that which is charged on payday loans.
4. Other Forms of Unsecured and Secured Borrowing
An unsecured loan from a bank or a secured (homeowners) loan will require that credit checks be performed to determine whether you qualify for them or not. If your credit rating is poor, you could end up paying higher interest rates with these options because you will be considered as a lending risk.
Because credit checks will have to be performed when using these options, it will take longer to obtain your money. However, an advantage of these options is that you will often be able to take your loan out for a longer timeframe. They will also attract a much lower APR than payday loans.
5. Obtain Free Vehicle Equity with a Logbook Loan
The main advantage of a logbook loan is that you will normally be able to access the money you need within a few hours at the most. However, unlike a payday loan, you are releasing the equity from the value of your vehicle, which you will still be able to continue driving while repaying your loan.
Interest rates for logbook loans are also lower than those charged with payday loans. Lower interest rates and assurances of no unexpected fees render this option far more preferable than many other types of loans – especially owing to the fact that your repayments will be for a fixed amount.
If you are in the middle of a financial emergency, the last thing you will want to do is worsen it with a payday loan. There are many organisations available that can provide you with sound financial advice including StepChange and The Money Advice Service.