Payday Loan Alternatives

There are many critics of payday loans that will tell you that these types of loans are not good options for financial assistance, especially if you are going through a rough patch in terms of money. Payday loans are more appropriately called payday cash advances, as they are based on your next paycheck and you are expected to repay this loan, as well as applied fees and interest, on the date of this check. They can be expensive, and restrictive, though, and are recommended only for emergency situations. Before taking out one of these loans you should consider the alternatives.

Alternatives: Other Loans

There are many other loan products available that may offer a better option for your financial needs than a payday loan.

  • Personal loans through your bank can cover expenses with a higher amount, lower interest and longer repayment period than payday loans. These tend to require a good relationship with your bank, as well as collateral and good credit standing in order to be eligible. Repaying these loans promptly keeps costs down and can further improve your credit score, making you eligible for larger loans later.
  • Loans are also available through financial institutions created specifically for the purpose of offering loans. These are usually slightly more expensive than bank loans, but have lower credit requirements. You still need to meet certain income, expenditure and credit standards, however.
  • If you have a life insurance policy that has a cash value component, you have the option of taking a loan out on the accrued cash value. This loan will remain interest-free as long as you repay it promptly.

Alternatives: Cash Advances

A cash advance is essentially getting money early from an anticipated payment. A payday loan is similar to this, but there are other types as well.

  • Some employers give you the option of taking a cash advance on a future paycheck. This can be a good choice because there are no fees or interest associated with these advances. You do not need to repay this advance, it will simply be deducted from your next paycheck.
  • Many credit cards allow loyal users to use some of their available credit balance in the form of a cash advance. There are generally fees and some interest, but they are lower than payday loans, and depending on your credit balance there may be more money available.

Alternatives: Other Options

Sometimes there are ways to collect the money that you need without going to a financial institution. These may not be the most attractive options, but they can help you to avoid the problems sometimes caused by overuse of loan or advance products.

  • Pawnbrokers allow you to borrow money using common items such as jewelry, electronics and collectibles as collateral. When you return the money, you get the item back. Many also purchase items straight out, which can give you fast access to no-fee, no-interest, no-repayment money.
  • Selling gold and other precious metals has become a popular way to pick up extra money. If you need a small amount of money it is possible to sell a few pieces of jewelry, silverware or coins and get the money.
  • One of the most obvious alternatives is to ask for help from family and friends. This may not be easy, but it can get you the money that you need without having to go through application processes or risk further financial damage.

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