Which Are Best Alternatives To Payday Loans?

While Payday loans can provide short term relief, the high interest rates can actually create a debt trap

Payday loans are preferred, as they are easy to get and available in small amounts of around $500 or less. However, due to the high charges and interest rates, payday loans can lead to a financial quicksand. If you are thinking about payday loans, here are some good alternatives that you can consider.

Negotiate with existing creditor – You can explain your situation to your existing creditor to see if some relief can be provided. You can request a payment extension or a hardship program. Creditors can adopt a flexible approach if they feel you are facing genuine financial issues. By negotiating with your existing creditor, you can avoid unnecessary fees and high interest charges. It will also help maintain a positive relationship with your creditors.

Payday Alternative Loans (PALs) – You can approach credit unions, many of whom offer Payday Alternative Loans (PALs). These entities are member-owned and focus on financial wellbeing of borrowers. With PALs, you can get flexible payment schedules and low interest rates. You also have the opportunity to improve your credit score, as PALs are reported to credit bureaus.

Personal loan – If you have a decent credit score, you can look for a personal loan. The interest rate on personal loans is usually lower than payday loans. Moreover, you can get a longer repayment period. If you pay your personal loan installments in time, you can also improve your credit score.

Nonprofits and charities – These entities help individuals who may be facing financial hardships. Nonprofits and charities can assist you with your utility bill payments. They can also provide transportation aid, food pantries, etc. These entities can help reduce your financial burden without adding more debt.

Try increasing your income – With the gig economy flourishing, many new income opportunities have emerged. Depending on your skills, you can make decent money in just a few hours or days. It can fix your financial needs and help avoid the burden of taking a payday loan.

Ask friends or family – If your needs are genuine, you can request financial assistance from a friend or family member. It may feel awkward and embarrassing, but can be beneficial in the long run. Just make sure you communicate clearly and repay the debt in time, as promised.

As is evident from above, there are many alternative options to a payday loan. Since prevention is better than cure, you also need to create a monthly budget and follow it strictly. People often do not take notice of the mounting expenses and end up in a financial mess. With a detailed budget that has provision for regular savings, you can avoid financial emergencies in the future.