Most people turn easily to payday loans and cash advances to tide over financial exigencies. The benefits are tempting enough, you get the money easily in just under 24 hours and you do not have to submit your credit report. However, the rate of interest on these loans is exceedingly high, given the nature of short-term nature of these unsecured loans. There is a $15 charge on a $100 loan, the annual percentage rate comes to 390 percent, plus the default rate comes to 20 percent. So, in other words, if you are not able to pay back the money with a predetermined period of time, one could sink into a debt trap. Here are the alternatives to payday loans and cash advances –
1. Local Credit Union – Nonprofit credit unions offer cheaper loans to its members. You can find out a credit union at a place where you live or work because they work on a community-oriented basis. They even offer cheaper payday loans that you can pay back over a period of time that can stretch to 3 months. The interest rate can be flexible and lowered to those who have a poor credit history. Most credit unions will also offer a loan, that is called an unsecured loan, meaning you can borrow money at a lower rate without using collateral.
2. Authorized Bank Overdraft – Compared to a payday loan, an authorized overdraft from your bank can be a more convenient form of borrowing.
3. Advance from your employer – instead of taking the high road to applying for a payday loan, you can simply ask your employer to pay you an advance. This should not be a problem if you are having a good or even balanced equation with your employer. More importantly, you do not have the fear to be trapped in debt, if you are not able to pay back the money. Or else, you can even work overtime to increase your pay.
4. Borrow money from you savings account – If you have a secured savings account of emergency fund, you can use that money to fund emergency situations. If you do not have one, you can consider opening one and put some cash in every week so that it is adequate enough to come to your rescue when you are in need for funds.
5. Borrow from a friend or relative – You can always ask your friend or relative to pitch in with some money to help you during these uncomfortable times. Most friends and relatives would not even ask you to pay interest, however this depends on the equation that you hold with the said person. However, treat the lending process seriously as you’d with an official lender. You do not want to lose friendship at the cost of a few hundred dollars.
6. Sell some of your old stuff – There may be so many things in your house that you do not really need or make use of. You can now sell them in a garage sale or even sell them online in sites like EBay and make a good amount of money, which may even exceed what you need
The FTC has a comprehensive guide to help you save money and avoid high interest loans online.