Payday loans that accept chime, Payday loans could end up costing you more in the long term. Learn about your options for borrowing money, extra cash, and getting paid on time before you apply for a payday loan.
Payday loans are a great option if you need quick cash. Online payday loans could be an option. But are they a good idea for you? But they are not the best option.
Payday loan lenders can be very expensive for consumers. Continue reading to learn about payday loans and other loan options.
What is a Payday loan?
A payday loan is a form of cash advance loan. Payday loans are a loan where you borrow money and pay it back the next payday. The lender may charge high-interest rates for payday loans, sometimes as high as 400%.
Payday loan lenders are considered predatory by many financial experts. Getting a payday loan could lead to you falling into a cycle.
While payday loans are great for emergencies, they can also be a burden financially. If you have an emergency, you might consider other options to borrow money quickly.
Why are Payday loans bad?
Payday loans can be costly and have unfavorable terms. This can lead to severe financial hardship. These are the top reasons why payday loans should not be considered as a last resort.
- High-interest rates: Payday loans are typically at the higher end of the interest rate spectrum for short-term loans. Payday loans can cost up to 400% APR (annual rate of interest) or higher.
- Renewals can lead to a cycle of debt. Some borrowers have difficulty repaying a payday loan since the lump sum is due so quickly. The Consumer Financial Protection Bureau warns you that payday loans can be rolled over in many states if you cannot repay the loan on time. Lenders charge more fees each time a loan is extended or rolled over. This can lead to a vicious cycle of debt that is difficult to break.
- You will usually only be able to borrow small amounts. Depending on your state, you might only be able to lend a few hundred dollars. This may not be enough to cover your emergency costs.
- Pays only one balloon payment. Payday loans are not like other consumer debts that allow partial installment payments during the loan term. The entire loan must be repaid within two weeks.
- It won’t improve your credit score: Most payday lenders don’t report your payment activity to major credit agencies. Therefore, paying back your loan on time won’t help you build credit. However, it can seriously damage your credit.
Payday loans alternatives
These are ten options for payday loans to consider if you have a tight budget.
1. You might also consider a payday alternative loan
Payday alternative loans (PALs) are loans that can be used to replace payday loans. Credit unions may offer these loans. This option allows you to borrow up to 1,000 and has a 1 to 6 months loan term. A PAL is available to you as long as you have been a credit union member for at least one month.
Payday alternative loans can still have high-interest rates. PAL interest rates have been capped at 28% by law. This is much better than the typical payday loan rate.
2. Establish a payment plan with the company
Seek out a payment plan that you can agree to with the company you owe money to if you have difficulty making your payments. Although it can be uncomfortable to speak with the company, this is a better option than missing a payment.
Ask if you can set up a payment plan as an alternative to a payday loan. It is possible to pay part of the loan now and pay the remainder later. You can contact your loan servicer if you have federal student loans to see if they can put your loans in forbearance or defer your loans.
An income-driven repayment plan is another option, which reduces your monthly payments to a portion of your discretionary income.
It is essential to act and speak to your lenders to discuss a payment plan.
3. Get a Payday Advance App
A payday loan is an option if you have a steady source of income and need to get a cash advance. Payday loans are more flexible and affordable than payday advances.
Payday advance apps are more flexible than traditional payday loans. They don’t charge interest because payday advances can’t be considered loans.
Payday advance apps such as Earnin or Dave will give you a portion of your next paycheck without interest. Although fees are minimal, some apps allow you to tip freely.
4. Save Money
It can be difficult to save money, and it can take time. This can give you a feeling of security if you start growing your savings account. Consider dipping into your savings if you have a solid savings account.
This is why it is important to have a savings account. Your savings can be a buffer in case of an emergency. It is much better to rebuild your savings than pay back a payday advance.
It’s like borrowing money from your savings to pay for your future. Are you willing to pay your loan back rather than paying 400% interest on a payday loan?
5. Borrow money from family members or friends
Although this is not an option for everyone, if you have friends or family that can lend you money, you might consider borrowing from them.
Your parents may be willing to lend you money interest-free. Are you close to someone who could spot you while you do this?
Be clear about the amount and time frame you will pay them back if you decide to do this. This route can be difficult, and you don’t want to damage relationships or break existing ones. This can help you avoid payday lenders if there are no strings attached.
6. Side hustles can help you make extra money
If you need extra cash, the first thing to do is to cut back. If you have already cut back, the next step is to make more money. Side hustles are a way to make extra money if you have the time.
Side hustles are a job that you do to make more money. I did side hustles as a brand ambassador or freelance writer while I paid off my debt.
Side hustles include dog walking, graphic design, babysitting, and Uber. Find your passion and focus on your strengths.
7. A personal loan can be taken out by a bank or credit union
Payday loans are not the best option if you have outstanding debts or need to pay for your basic expenses. You might be wondering, “Where can you get a loan with such low-interest rates?”
A bank or credit union may offer a personal loan. If you have excellent credit, a bank or credit union may offer a lower rate than a payday lender. You can get a loan even if you have bad credit. The lender will decide, but you might have a lower chance of approval.
If the bank or credit union offers a loan at a favorable rate and flexible repayment terms, it is worth considering.
8. Sell your stuff
Sometimes creativity is all it takes to make quick cash. You can sell things you don’t need or want. It’s time to get rid of anything that doesn’t bring you joy. Don’t keep it if you don’t use it.
Your items can be sold on Facebook Marketplace and Poshmark. Think about it: Selling your stuff could be the key to bringing in more cash and avoiding a payday loan.
9. Get a Credit Card
Although I wouldn’t condone credit card debt, my credit card may be a better choice than a payday lender if you are thinking about getting one. While credit cards can have higher interest rates than payday loans, they tend to be lower than those offered by payday lenders.
You’ll pay less interest if your credit card is used strategically. You should not max out your credit cards as this can affect your credit utilization, which can lower your credit score.
10. A Line of Credit is a way to get credit
You can also take out a line of credit. A line of credit is a form of credit that you can use to get funds from financial institutions. If you have a limit on the amount of credit that you can draw, a line of credit differs from a loan. Once you have borrowed the money, interest is not charged.
A line of credit from a financial institution can give you access to capital quickly, which could prevent you from needing a payday loan.
Are you looking to make more money? Steady has helped more than 2 million people find work and earn an average of $4,000 per year. Steady’s Income tracker will help you better understand your cash flow!
eCreditDaily Online’s Top Alternatives to Payday loans
eCreditDaily Online members can also avoid payday loans by using multiple methods.
eCreditDaily Online’s mobile app allows customers who are eligible to get their money faster. eCreditDaily Online accounts with early direct deposits will allow you to access your money two days sooner than traditional banks.
eCreditDaily Online offers overdraft protection to eligible members if they need extra cash to cover an expense. eCreditDaily Online spots its members with SpotMe up to 200 free of charge instead of being hit with an excess draft fee.
eCreditDaily Online’s Credit Builder Visa Credit Card also has an ATM feature that allows members to withdraw cash via cash advance without interest or fees.
This cash advance features to ensure that eCreditDaily Online members are protected against the unforeseeable.
A payday loan might be a good option if you are in deep debt and worried about how you will pay it. There are other options. You can save money by using the payday loan options above.
After you have resolved your financial problems, start to build your emergency fund. You will be able to better manage unexpected expenses without borrowing money.
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I am David, economist, originally from Britain, and studied in Germany and Canada. I am now living in the United States. I have a house in Ontario, but I actually never go. I wrote some books about sovereign debt, and mortgage loans. I am currently retired and dedicate most of my time to fishing. There were many topics in personal finances that have currently changed and other that I have never published before. So now in Business Finance, I found the opportunity to do so. Please let me know in the comments section which are your thoughts. Thank you and have a happy reading.