Every year, approximately 12 million people take out payday loans.
Are you considering taking on out yourself? Or, would you like to learn about other ways that you can get the money you need?
Payday loans are not an inherently bad option, contrary to what some people might have you believe.
However, there are other ways to make ends meet and finance your endeavors without taking out a payday loan, online or in-person.
Read on to learn about some alternatives to payday loans. You’ll also learn about how to find the best online payday loans if you choose to take that route instead.
What are Payday Loans?
Before we get too far into alternatives to payday loans, let’s go over what a payday loan actually is.
Payday loans are a type of short-term, high-interest loan. These loans are for relatively small amounts of money and are meant to help you make ends meet until you receive your next paycheck.
The terms for these loans are quite short, too. They usually last just 2-4 weeks or the length of a typical pay period.
There aren’t any limits on what you can use a payday loan for. You can use the money to catch up on bills, cover the payment on a motorhome or auto loan, or to help you finance a repair. The choice is yours.
The biggest drawback of payday loans is the fact that they can have high fees and interest rates. In fact, the average interest rate for a payday loan is nearly 400 percent.
Because of these high fees and interest rates, it’s important to be smart about the way you use the money you receive from a payday loan and make sure you can pay that loan back as quickly as possible.
Best Alternatives to Payday Loans
As you can see, payday loans can be risky. If you’re not interested in a high-interest loan, or if you need to borrow more money than you can get with a payday loan, there are alternatives out there for you.
Here are some of the most popular payday loan alternatives you might want to consider:
Borrow from Friends or Family
Nobody likes to admit to their friends or family that they’re in financial trouble.
This can be your best, lowest interest option for getting the money you need, though. More often than not, your friends and family will be happy to help you out, as long as you don’t take advantage of their generosity.
Before you decide to take out a payday loan, consider asking the entity to which you’re indebted if they will set up a payment plan for you. This can make it easier for you to meet your monthly payments and help you avoid having to go further into debt.
Before you take out a payday loan, consider a personal loan instead.
Personal loans will have lower interest rates and may make it possible for you to borrow a larger amount of money. There are even personal loans designed for individuals with bad credit, so don’t let that hold you back from applying.
Payday Alternative Loans
Some credit unions offer Payday Alternative Loans, also known as PALs. This is a small loan that will help you make ends meet, much like a payday loan, but without the super high interest rate.
A cash advance isn’t a great option, but it is a lower interest option than a payday loan. Just don’t get carried away, and be sure to have a plan in place to pay off the advance as quickly as possible.
You may want to consider borrowing against the money in your 401(k), too. This is not a great long-term solution, but it can help you get the money you need. You pay the interest back to your own account, too, so it’s not as big of a hit as when you’re paying interest on another type of loan.
Home Equity Loans
If you own your home, you can also borrow against the equity you’ve accrued. Obviously, this isn’t an option for everyone, but it’s a good payday loan alternative if you do happen to be a homeowner.
Finding the Best Online Payday Loans
As you can see, there are lots of alternatives to payday loans. In some cases, a payday loan is your best or only option.
If you’re in this situation, these tips will help you find the best online payday loans possible:
- Look for contact information — ideally, there will be a physical address, email address, and phone number.
- Make sure they comply with state laws regarding interest rates and borrowing limits.
- Consider customer service — reach out to their customer service line and make sure they offer sufficient assistance.
- Consider the application process — it should only take a few minutes and shouldn’t require a ton of information (although you will likely need to provide your Social Security Number).
- Compare rates and terms — online lenders like Bonsai Finance make it easier for you to see the interest rates and terms for various loans so you can make sure you’re getting the best loan possible.
Finally, be sure to read the fine print carefully. This will help you make sure you understand what you’re agreeing to before you sign anything.
Looking for More Financial Advice?
As you can see, there are lots of great alternatives to payday loans. Keep these options in mind if you need a large loan or want to keep your interest rates as low as possible.
If you need money quickly, though, and only need a little to tide you over until your next paycheck, a payday loan is still a good option to consider.
Be sure to also keep the guidelines in this article in mind if you decide to apply for a payday loan so you can get the best online payday loans possible.
Do you need more help with your finances?
If so, be sure to check out some of the other articles on our site. This one on the importance of making your payments on time is a great starting point.