Tuesday, August 13, 2019

8 Alternatives to Payday Loans

Everyone experiences times where loans are required regardless of your financial status or situation and these situations can sometimes be expedient. These situations can be as a result of emergencies or overwhelming debt among other things. It is essential that you choose the loan option that is least likely to negatively affect your current financial situation or severely impact your future goal when any of those needs arises.

An option regularly chosen by consumers who find themselves in a bind requiring urgent assistance is the payday loans. It is quite unfortunate that these types of loans are not always given with best interests in mind. In fact, this category of lending is often viewed as predatory and has a reputation for taking advantage of borrowers who can easily be faced with interest rates of up to 400%. Considering alternatives to payday loans is vital before making a decision. In this article, we’ll discuss some other options that may be available to you and why they may be more helpful in your situation.

Peer-to-peer lending
This form of lending has grown in popularity in recent times. Investors are allowed to fund loans fro borrowers using their personal finances in this type of loan. While you can secure pretty low-interest rates utilizing this loan format, it is mainly available to those that have higher credit scores.

Emergency Savings
This is the best time to draw on your emergency savings if available. You should typically use emergency savings to cover rent, healthcare, bills, groceries and other day-to-day expenses in the case of an emergency. However, situations vary; if you don't have emergency savings, and depending on the severity of the situation, you may also consider utilizing other savings accounts.

Pay Advance from Employers
This can be a good outlet for seeking assistance when you are hot with a financial emergency. It requires you having a good relationship with your employer. This emergency route is most beneficial because there is no need to pay back or worry about interest. It is simply you receiving your payment early with the expectation that you continue to work.

Negotiating Payment Plans
Most companies and even credit cards are willing to work out arrangements with you on payment of you are struggling. If you’re considering taking out a loan to facilitate paying your bills on time, try speaking with your creditors or utility companies first. Often, they can help you either delay when your payment is due or reduce the amount you owe with various programs they may have in place.

Credit Cards
You can use credit cards for emergency purposes but it is not highly recommended. It is however, better than getting payday loans. You won’t pay higher than 28-30% with credit cards but you will pay much higher interest with payday loans.

Credit Counseling
If your financial or credit situation seems out of control, before adding to the strain, consider seeking counseling. There are various credit counseling services available to you, often at no cost, which can help. The National Foundation for Credit Counseling can help lead you to a service in your area.

Personal Loans
You can take personal loan through your bank or a credit union. Doing this can help you secure lower interest rates which is still lower than that of payday loan. All you need to do is have a decent credit score. If you have a good relationship with your bank or credit union, you should really check this out. Short-term emergency loans are even offered which some members can utilize to help them become financially stable again.

Loans from Family or Friends
You can consider asking your friends or family for financial help if you have a good relationship with them and have not borrowed money before. Usually, they won’t charge you interest (or very little). However, you do need to be careful when going this route - don’t ask for too much and make sure you pay the loan back promptly and within the terms of your arrangement.

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