Payday loans are a convenient means of securing funds for an unexpected emergency, but that convenience comes with both high interest rates and strict repayment conditions. As a result, if you can avoid them, it is likely in your best financial interest to go for an alternative solution. Fortunately, there are a number of these alternatives available to you, ranging from simply spending less to approaching less traditional sources of credit.
Here are only some of the alternatives to payday loans:
Alternate Financial Institutions
Banks and other traditional lenders are not the only potential lenders out there. One prominent example of an alternative lender is a credit union owned by its clients. Although you need a good credit rating and must belong to the credit union, you can get better terms on a short-term loan than available most other places.
Borrowing From Friends and Family
Friends and family members are often both more obliging than lenders when it comes to loans and more compassionate too. Appealing to them during your time of need can help get you out of your troubles without incurring large amounts of interest. Of course, this depends on your friends and family members being both able and willing to help you out with your financial difficulties.
Credit cards are another alternative to payday loans. Although credit cards can also charge large amounts of interest on outstanding debts, they can also provide you with the option to repay your outstanding debt over a long time using multiple smaller payments rather than all at once. Furthermore, credit cards are even more accessible than payday loans because they are lines of credit and can be used right away instead of waiting on a response to your application.
Depending on the urgency of your need for funds, you might be able to simply cut back on your expenses and save up. Although it might be unpleasant, cutting back on your expenses is almost certainly the cheapest option available to you.
Although sometimes used as a synonym for a payday loan, a payday advance can also describe a request made to your employer for an advance on your next paycheck. Keep in mind that not all employers are so obliging and that some might even charges fees for the service. On the other hand, some employers are that obliging and might even be willing to let you repay the advance over multiple paydays instead of all at once.
Short-term Personal Loans
Short-term personal loans are an almost perfect alternative to payday loans, barring the increased difficulty in securing one. In exchange for higher borrowing requirements, you can get a short-term loan usable for any personal purpose that comes with superior loan conditions and lower interest rates compared to payday loans. Furthermore, some personal loan lenders are even beginning to mimic payday lenders in the ease and convenience of their online application processes in order to encourage more customers to use their services. As a result, even that advantage of payday loans is lost in comparison to the right short-term personal loan.
This guest post was contributed by Darren Bechard, a freelance writer and independent finance researcher. He mainly writes about business finance and enjoys sharing his tips and insights on numerous blogs. Visit Wonga.com for more finance options.