11 Best Alternatives to a Payday Loan

11 Best Alternatives to a … image

Recently, shocking data emerged. Approximately 12 million people in America use payday loans to cover emergency needs on a yearly basis. The figure is constantly rising.

In any case, we should admit that payday loans are helpful options to settle urgent needs. Nevertheless, borrowers are often troubled by the measures that come with loans. Simply put, not every borrower is able to use the loan wisely. 

The lending processes are hardly regulated. This breeds a lot of issues. The continued decline in the availability of alternative loan options doesn’t help either. Stories of debt trap are common with borrowers. The measures, especially the short payback time and excessive charge of 1000% APR make the tales more horrifying.

Most borrowers are trapped in an endless repayment process with hidden charges that damage their credit reputation and wreck their accounts. This is worse when they fall into the wrong hands – very dubious lenders. Nevertheless, it is possible to find a reputable lender that will help you deal with financial issues without negative consequences. 

What’re Payday Loans; How Do They Work?

If you still struggle to classify a payday loan, this explanation should help.

Quick loans usually accessed for emergency needs and repayable in a fixed, short time are payday loans. Also, there are additional expenses you’re required to pay back by your next payday – interest rates. If you fail to pay back, you will roll over the interest and fees until they become a huge, exorbitant amount that gets you into a debt mess. 

These loans hardly take tedious processes. They’re likely the easiest set of loans, requiring just a few details. You only present your pay-stubs or similar proof of employment and existing personal account. 

Why People Apply for Payday Loans

The reasons people often settle for payday loans vary. Most just don’t have an alternative. Taking into account how easily these loans come, they could be the only option for people who are hit by low earnings, fluctuating income or even a sudden occurrence that leads to some urgent need. Although the relief these loans give is just temporary, they help after all. 

Sadly, over 80% of borrowers are showing the inability to pay back. Sometimes, they borrow just after repaying the previous loan. And this spirals into a huge debt burden. That is why you should be certain in your ability to return the loan before applying for one. 

See also: All about credit score in the Philippines

Why You Should Avoid Loan Sharks

The intention here isn’t to sign a death warrant on payday loans. No, not in the least. However, you should be clear on the dangers before you apply for one. While loan shark companies offer juicy and easy options, they can pull you into financial trouble in the long run.

Therefore, check if you can trust the lending company before using its services. Understand that payday loans charge high-interest rates. And you’re required to pay up the entire amount before the due date. How about if you don’t have the entire amount to pay up at the due time? A pity case, isn’t it? So, once again, check and calculate everything twice if you want a loan to be a relief.

What Are the Alternatives to Payday Loans?

A debt trap isn’t the end of life. If you ever find yourself in that dilemma, you can still find a way out. There’re available alternatives you can trust to source finance from aside from payday loans.

Everyone understands the pain of parting with personal belongings just to offset a debt that is biting you at a particular time. Running to family members or relatives now and then for help isn’t easy as well. But none of the options is more unsettling than being at the mercy of a payday creditor.

Aside from the options that will be discussed below, you may want to find other less inconveniencing options. Compare the options and pick the best one. 

See also: Can a Housewife Actually Apply for a Loan?

Seek The Help of Credit Counselors

Being in a debt burden already gives away your inability to manage budget properly. If you share this difficulty, you may need the help of a credit counselor.

Aside from a credit counselor, you can seek help from community assistance programs or some nonprofit experts. They’ll help you draft a good budget plan or even a debt repayment plan. You can pick the idea on what to do from there. 

Moreover, there’re other ways this move will benefit you. It’ll help you fix the basic financial problems that primarily pushed you into the debt trap. When these issues are fixed, you could find a way out of the debt. 

Ask for the Assistance of Friends or Family 

How good are you with people? Do you have family members, relatives or friends who care? Answers to these questions matter at this point.

Seeking the help of your family, friends or even colleagues may be your option to deal with financial difficulties.

These people are your dearest when it gets tough for you. You can either borrow or ask for financial aid from them. However, this should come after a genuine explanation of the situation. Don’t be too shy to tell how bad things are with you.

Good thing, borrowing from friends and family doesn’t come with an interest. The measures are less stringent and you have enough space to breathe air before repayment.

Granted, going into such a financial agreement with a family member or a few of them is delicate. To avoid any issues, set a repayment plan before borrowing and sincerely follow it through. If you show signs of unfaithfulness to repayment, it may put your family or friendship ties in jeopardy. 

Ask Your Employer for Help

A good relationship with your employer or colleagues is important. It helps you access favor from them easily. One of such favors is asking for financial assistance or loan from your employer or colleagues.  

Mostly when the loans are urgent, going to them may speed up the process of resolving your issue. They may just be very much willing to help.

Afterall, which good employer or organization will see their hardworking staff trapped in a financial mess and look away? They will want to help so that you can take your mind off the problems and concentrate on your job. Failure to do so may likely affect your productivity at work. It makes it easier if you’re one of the favorite staff they love having around. 

Some companies have financial or loan packages for their employees. The purpose is to meet the financial needs of their employees’ financial burden. Apply for such financial opportunities or talk to your boss if your organization doesn’t offer such service. 

Find Quick Ways to Make Extra Cash

Try out freelancing or find contract jobs to do in your free time. 

Taking up a freelance could help put more money into the account and strengthen your financial freedom. You could sign up for some freelancing jobs online. All you need is your skills, a laptop, and a stable internet connection and to be ready to work. So, freelance tasks will help you earn you quick cash. Regardless of whether the pay comes big or small, it could help a great deal. 

Sell Things If You Can

Yes, no one is cool with selling off assets to settle off financial needs. It’s discomforting especially when this stuff costs a little fortune.

Nevertheless, letting go of some priced items could prove to be the no-brainer of the situation. Musical instruments, electronics, hobby items are just a few things you can trade-off.

Also, if you reside in the urban areas, you may want to consider selling off your car. Transport in cities is usually cheaper. Instead of suffocating in a debt burden, you may want to let go of that car and find some relief. 

Negotiate with Your Creditors

Loans should offer a mutual benefit to the borrower and the lender. It shouldn’t be a one-way benefit. You may want to find a mutually benefiting ground for payment both parties will find convenient. After all, your creditors want the debt to be paid. If you can’t hit their target, it doesn’t pass a sentence on you. There’s always a way out.

They can help set up a much better repayment plan. Extending the due date is also a possible option. You just have to approach lenders and ask for help. Most likely, they will be willing to help.

Take Out a Payday Alternative Loan (PAL)

Are you a member of a credit union that gives alternative loans? That could be another good option to consider. 

You can find a few of these credit unions which help with financial solutions. How much you can get from them depends on your ability to pay back. You can get from $200 to $1,000 with APRs of 28%. It takes a long time until the due date.

The loan takes some time to process. It’s the same for both members and non-members. However, if you want to get more soft loans in the future, they’re a great option to consider.

Apply to a Bank or Credit Union

If you are credit-worthy, you can refer to banks or credit unions to find help. Of course, this isn’t an easy ride. 

Banks or credit unions often help their local community people with small loans they can easily repay.

Being nonprofit, a few of these Community Development Financial Institutions (CDFI) only assist local people. Their objective is to lift them out of financial difficulty. Though, you’ll have to reside or work in the area to merit it.

An Advance Payment App Can Help

You can find a pay advance App (there’re many of them online) and create a seamless repayment plan. You can apply for an advance loan of say $200 with either reduced or no interest. You may be asked to either drop a tip for the offer or pay an amount monthly.

Merge Your Debt For a One-Time Payment

If your debt comes with high interest or you must deal with multiple loans, there may be an exit option. You can merge payments or find a reduced APR.

High interest on the debt could affect you strongly. It may even pose a constraint in fulfilling your payment commitment to the debt. A combined debt can help you out. You can use one loan to pay off multiple others. This will leave you the option of paying just for a single debt each month.

With this arrangement, you can easily channel your attention and strength to just one debt. And most likely, the interest rate will be reduced as well.

Find a Lending Team and Join It

With a steady income or steady inflow of cash, you can beef up your savings for the rainy day by joining a lending team. This is especially suitable;e if you have a DTI that’s less than 50%.

Being a member of a team of lenders helps you to get soft loans that require next-to-nothing interest easily. The money is often taken out from the account of the team. And your inability to pay up will only cost you your contribution or some amount to support your contribution. 

Already, online platforms have sprung up to offer such services. This goes on in a circle. You can apply for jointly with family members or friends or even strangers to raise your credit abilities monthly. 

Bottom line

Everyone faces a moment of tight financial need. The only difference is in your approach to resolving such emergency needs. The wisdom to consider all available options helps to choose the best and most convenient one. Even if you will not find a better alternative to a payday loan, you can use your brain while selecting the best lending company.

Live a debt-free life.