At one time or another, we’ve almost all been there: the dreaded moment when the bills come knocking, and there simply isn’t enough money to cover them all this month. It’s a frustrating situation that can leave us feeling helpless and anxious. We find ourselves desperately seeking a way to bridge the financial gap until our next paycheck rolls in.
Payday loans are tantalizing — quick cash with no credit checks or rummaging through tax returns like with a personal loan. It sounds too good to be true.
That’s because it is. About 12 million Americans take out these easily accessible unsecured personal loans every year, many of whom are struggling with monthly bills and personal expenses. Many aren’t aware of the danger of insanely high, triple-digit interest rates.
“Unlike other loans, payday loans must be repaid in full on the borrower’s next payday at annual interest rates of around 400 percent,” wrote Melissa Rayworth of TakePart. Rayworth also noted that up to 97% of people will borrow from a payday loan again.
Payday loan borrowers are vulnerable to a downward spiral of debt that can last months or even years, a wrecked credit standing and predatory, aggressive collection practices from debtors who want immediate repayment. “If you take out a payday loan, you’re going to come out the financial loser almost every time,” wrote Trent Hamm of The Simple Dollar. “They almost always cause more problems than they solve.”
Avoid Payday Loans With These Quick Cash Alternatives
You have a number of options to check out before going to payday loan route.
1. Take Out a Payday Alternative Loan
Yes, these actually exist. Iowa-based Veridian Credit Union, for example, offers a PAL with a maximum loan amount of $1,000 and a six-month repayment term at an interest rate of around 20, usually regardless of a borrower’s credit score. While not the lowest interest rate, it’s more manageable than the high interest and short repayment terms of a payday loan. Keep in mind, Veridian is a credit union that serves residents of certain counties in Iowa and Nebraska and a few other select groups. If you’re not part of its membership field, ask a community bank or credit union near you if it offers a comparable product.
2. Get a Cash Advance From Your Credit Card
Another similar, yet less expensive option, is to contact your credit card carrier for a modest cash advance. Again, the interest rates might not be the lowest, but this time, you’re borrowing against your own credit limit and not some third-party payday provider. If the cash advance option seems too insurmountable to you, simply use your credit card for your one-time emergency purchase and avoid using it again until you’ve paid down your balance.
“This is not a risk-free option, as it could rack up costly fees and interest rates,” said Keith Sant, founder and CEO of Sell My House Company. “However, for those in an emergency situation who are unable to access other options of quick cash, this may be a viable option. Just make sure that you read the terms and conditions thoroughly before taking out a cash advance on your credit card.
3. Withdraw From Your Emergency Fund
If the added interest of using your credit card is too much to deal with, you can always try taking just enough cash from your emergency fund to cover holiday shopping expenses. Since you act as your own lender here, this loan is entirely up to you to repay — but financial discipline is important. Let too much time go by, and you might never get around to replenishing what you borrowed. And that means you might not have enough money if a real emergency arises.
4. Ask Your Employer for an Advance
Your job might permit you a cash advance taken from your next paycheck. It’s not a loan, so you won’t have to deal with interest or repayment since it’s money that you have earned. However, keep in mind that if you ask for $200, be prepared for your next paycheck to reflect that difference. It’s also not wise to make a habit of asking for cash advances. Taking frequent financial shortcuts could leave a bad impression on your employer. Request overtime instead — the extra hours can yield you some extra cash.
5. Sell, Pawn or Auction Off Unwanted Belongings
“If I was in a bind, the first thing I would do is look around the house for items that I haven’t used or thought about in over a year,” said Michael Morris, founder and CEO of PursuitofPassiveIncome.com. “Those items are useless to me, but likely have value to someone else.”
Now’s a better time than ever to sell some of those old things taking up space in your house. It could be anything from a used cellphone to furniture, vintage clothing, appliances and more, a rich source of quick cash. Go the online route, like eBay, Amazon Marketplace or Craigslist or check out apps like OfferUp and Mercari.
“This is a great way to bring in some extra income quickly without subjecting yourself to a difficult financial situation and allows you to keep your emergency fund for a rainy day,” Morris said.
6. Borrow From a Lending Network
Online lending networks are platforms that serve as intermediaries, connecting borrowers with a network of potential lenders. The process typically begins with the borrower filling out an online application, providing necessary information about their financial situation and loan requirements. Once the application is submitted, the lending network assesses the borrower’s profile and matches them with potential lenders who fit their specific criteria. This eliminates the need for borrowers to individually approach multiple lenders, saving time and effort.
Lending networks also allow borrowers to select from a wide range of loan options, compare rates, terms and lender reviews to make informed decisions. Before you take on any debt, however, be sure to carefully compare loan offers and be aware of any associated fees.
