A payday loan is a high interest short-term loan designed to be covered within the next pay periods or two. As payment for the loan, the borrower either use a direct debit authorization to their checking account provides or a post-dated check.
Because such loans usually don’t require a credit check and a good credit history, people with poor credit history or are with financial problems usually opt for this option. And because of the nature of this type of loan, it’s also very easy to fall into a financial debt cycle that may reach up to 400% interest and even more burdens financially.
These types of loans usually become very tempting and a very attractive money trap for consumers who find themselves in a financial bind and feel they have ran out of options. There still are other alternatives though.
A payday loan is something that needs careful handling and extreme caution, and as much as possible, it should be considered a last resort type of solution – and something to get only if you are capable of paying the loan back within the given period. Otherwise, you should seek more consumer-friendly and a more affordable alternative.
Alternatives to Payday Loan:
1. Negotiate repayment options with your creditor. If you’re positive that you won’t be able to handle your payments on time and feel like you need an extension, call your creditor or loan company and ask for extra time. You can negotiate for a new payment plan that will be suitable for your financial situation.
It may come as a surprise, but a lot of lenders are actually willing to work with you and accept your offer for an extension.
2. Get a cash advance from your employer. If your financial need is what one might call an emergency, try to talk to your employer and see if you can avail for a cash advance on your salary.
The good thing about this alternative is that it’s not really a loan by nature because it’s your money in the first place – but you’re just getting it a bit sooner than you normally should. This option also is essentially cheaper than a payday loan because, since it’s not a loan, it has no interest.
3. Borrow from your savings account. If you have an emergency fund or a secured savings account, try to consider tapping into it. If you don’t have one, then it might be time to have one just in case you get another financial turmoil in the future.
Starting with a small amount per week can unexpectedly be very helpful and becomes a lifesaver when financial troubles come.