Even though payday loans have high APRs and finance charges, they are the go-to lenders for many Americans. Payday advance loans have become popular due to the ease of access. But, before you press apply on that online payday loan lenders page, is there an alternative? The short answer is yes; there are alternatives to payday loans that might be friendlier and more manageable.
Paycheck Advance
A paycheck advance is where your employer pays your wages in advance. During payday, your employer will recover part or all the money they advanced you. Paycheck advance can come in handy when payday is far along the month, and you need quick cash.
Most employers offer a paycheck advance at no extra cost whatsoever. This can save you from the high finance charges and APRs of payday loan companies.
Unfortunately, not every employer offers a paycheck advance. The best way to know if you can get one is to talk to your HR or supervisor. If this is an option, it is an excellent alternative to payday loans.
Personal Loans
You can get a personal loan from your bank, credit union, or numerous online lending companies. Personal loans can either be secured or unsecured. The difference between these and payday loans is that you do not have to pay the whole principal, interest, and other charges on your payday. In addition, with personal loans, you get a more extended repayment period and can pay them back in installments.
Unfortunately, many people assume they cannot get a personal loan, especially if dealing with bad credit. However, some lenders are coming around and extending such loans to individuals working to build their credit or have proof of stable income.
Before applying for payday loans with any lender, ensure you shop around and weigh all your options. You just might save yourself the high APRs and finance charges that come with payday loans.
Bank or Credit Union Overdraft
Does your bank or credit union provide you with overdraft protection? Overdraft protection is when your banker or credit union allows you to withdraw more than what you have in your bank balance. For example, you could be having a balance of $100, but your bank allows you to withdraw $500.
With this protection, your bank can authorize payment over your available balance without attracting penalties. However, talk to your banker or credit union beforehand to see the costs for this protection. Either way, it is an excellent alternative to payday loans and might be cheaper.
Budgeting
Perhaps one of the best alternatives to payday loans is working with a budget. Do you know your cash inflows and outflows? How much do you spend at any particular week, month and year? For example, how much do you spend on rent, groceries, utilities, fuel, and transport? This way, you can always stay ahead of your expenses and know when to expect any cash outflows.
Working with a budget also makes it easier for you to start cutting down on unwanted expenses. This way, you can start putting aside some money for emergencies. Once you have an emergency kit, you never have to rely on payday loans to meet unexpected expenses.
Credit Counselling
Are you dealing with a case of a severe debt cycle? You might be too deep into debt that you imagine. If you are always relying on payday advance loans for your every need, then you are too deep into debt.
You should consider seeing a debt counselor. A credit counselor will provide you with services like money management skills, debt management and repayment, and help you assess your overall financial situation.
Before resulting in instant advance payday loans to sort your emergencies, it is best to consider any available alternatives. For example, you could qualify for a personal loan, or your employer might give you an advance on your paycheck. Ultimately, the goal should be getting credit with affordable APR, finance charges, and a manageable repayment period.