If you find yourself facing a financial crisis, taking out a payday loan may seem like a reasonable temporary solution to your cash shortage. While we do not intend to denigrate payday loans entirely, with high interest rates and harsh repayment terms, these types of loans have the potential to worsen – not improve – your financial plight. If you’re in a situation where you need cash (and fast!) it’s worthwhile at least considering whether there are other options available.
Fortunately, viable alternatives to the high-interest payday loan do exist. Here are a few that you may want to consider.
1. Negotiate a New Payment Plan with Your Creditor
If you are struggling to pay your bills, asking your creditor for more affordable payment terms is a good place to start. Many creditors will offer an extended due date, lower monthly payments, and/or a longer timeline to repay your debt in the right situation. At the end of the day, most creditors simply care about getting their money, so if you are diligently trying to repay the debt rather than just skipping payments, creditors will likely work with you to improve their chances of getting paid.
2. Ask Your Employer for an Advance
Unlike a payday loan, a cash advance from your employer will generally not carry interest. Your work, in a sense, acts as your collateral for the advanced funds. So, unless you unexpectedly end your employment, you will not have to formally pay back anything to your employer.
3. Take out a Personal Loan or Payday Advance Loan (PAL)
Personal loans and PALs offer a much lower interest rate than payday loans or even some credit cards. They also offer relaxed repayment terms, allowing installment payments over time. And because approval for PALs is generally not determined by credit score, it can be a viable option for individuals in the toughest financial situations.
4. Use a Credit Card
This is a risky endeavor because it can put you in a worse position if you are not careful. If you have an emergency expense that you do not have the money for now, but you will soon, putting the balance on your credit card is a good option if you can pay off the debt quickly. Use a credit card with a low interest rate or consider using a new card with a 0% APR option.
However, do not use your credit card for a cash advance. Cash advances from credit card companies often carry hefty fees and strict repayment terms with your first payment typically being due the month after the advance is issued. As such, these types of advances can land borrowers in serious financial trouble, particularly when the ground they stand on is already shaky.
5. Pursue Credit Counseling or Enroll in a Debt Relief Program
Credit counseling is an excellent resource to help you manage debt, set a realistic budget, and improve your overall financial health. Similarly, working with a reputable debt relief company can help you get back on your feet financially through options like credit card consolidation and debt settlement.