When people need fast cash to help with unexpected expenses, their first thought may be to get a payday loan. However, before you make that decision, you should be aware of other kinds of short term loans that can also bring you fast financial relief. Here are 6 alternatives to payday loans:
1. Loans from friends and family.
Whenever you are experiencing a financial situation, and especially if you have bad credit, it may be worth it to seek help from your closest friends and family. In many cases, your friends and family will not charge you interest on the loan. However, it is important to remember that you may not be able to borrow large amounts and that you should repay the loan as quickly as possible. If you do not, you may put a strain on personal relationships. Offering to do odd jobs around the home or other areas when you cannot readily repay the loan may help reduce the strain.
2. Credit card loans.
If you have a credit card, you can use it to take care of an unexpected expense. However, just be aware of the interest rate and credit card limit so that you do not put yourself too far into debt. If you pay off the debt completely before the due date, you will not be charged interest, although this depends on the credit card company. It should also be noted that if you max out your credit card on a regular basis to take care of expenses, you will damage your credit score. By damaging your credit score, you may further limit your financial options in the future when you need money. Just like with other types of loans, credit card loans are best used for emergency situations or when you have the money available to quickly repay it.
3. Pawnshop loans.
Pawnshop loans are loans that you can obtain from a pawnbroker using a valuable item as collateral. Even people with bad credit can be eligible for pawnshop loans because credit checks are not required (your valuable is used as security). The actual loan amount that you receive will depend on the appraised value of the item. The loan term is typically 30 days, although this can be extended as long as the interest is paid. Once the loan amount and interest is paid, your item will then be returned to you. If you do not make payments, then the pawnbroker will sell your item to collect what is owed.
4. Credit union loans.
Credit unions differ from banks in that they often offer lower interest rates and approve smaller loan amounts, although comparison shopping will still need to be done for the best rates and services. Credit unions also differ in the fact that they are nonprofit organizations owned by their customers (members). To be able to borrow from a credit union, you will need to apply for membership, although this is typically achieved quickly and easily. The drawback to using credit union loans instead of payday loans is that your approval will be based on your credit. For those with bad credit, obtaining credit union loans may be more difficult.
5. Bank loans.
Although banking institutions may not offer loans as quickly as other sources, they should still be considered when you are considering alternatives to payday loans. With competitive rates and services, you may be able to get the help you need. However, smaller loans may be difficult to obtain and your credit history will be a major deciding factor.
6. Loans from your employer.
If you are gainfully employed, you may be able to receive a loan from your employer. This may be offered as one of the benefits to employees, although the terms and conditions will vary between companies. Although some people do not feel comfortable about their employer knowing about financial hardships, having the money you need can also help reduce stress in the workplace.
Payday loans can be beneficial, but are not for everyone. That is why carefully considering your alternatives to payday loans will help you make the best decision for your financial need.