Alternatives to payday loans
- Personal payment-one option is a personal unsecured installment payment from a responsible lender, such as a credit Union, Bank, or other financial institution. According to the Center for Responsible lending, unlike payday loans, these products are different:
Minimum 90-day refund
The variant of installment
The requirement that unfair collateral (the car’s name)
The limits of extension
Consideration of the borrower’s ability to repay
No mandatory arbitration
One-time late fee / penalty fee
- payment Plan with creditors — If the problem is related to debt, contact one or more creditors and ask them to agree on partial payments or develop a payment plan on a temporary basis. Sometimes a reduction or deferred payment or two is required.
- Pay an advance — Some employers provide a salary. If you work for a large company, consult with human resources. With a small business, ask the owner about progress. Usually, since this is an advance, not a loan, there will be no interest. It is important, of course, not to abuse this practice.
- Credit counseling — Although this is not an immediate solution, credit counseling can help avoid sinking deeper into debt. Visit the national Fund of credit advisors or call 1-800-388-2227 to begin the budget process and develop a repayment plan with your creditors.
- emergency Assistance-Local churches and community organizations often provide emergency assistance, providing assistance with everything from utility bills to groceries to car payments. The low-income household support program (LIHEAP) helps low-income households that have provided financial assistance when facing cold (or hot) weather emergencies (as well as other weather-related problems).
- Cash advance by credit card — Although a cash advance by credit card is not ideal, even at 30% APR, it is still much cheaper than a payday. Keep in mind that some credit card companies take advantage of consumers who need quick money by offering a secured credit card linked to a savings account or other asset. (For more information, see How a cash advance works .)
- retirement Accounts — you May be able to partially opt out of your individual retirement account (IRA) or 401 (k). You can (effectively) borrow from your IRA once a year, without penalty, if you return the money within 60 days.If you don’t, you will pay taxes plus a 10% penalty if you are under 59½. (For more information, see If you borrow from your retirement plan? )
Some (not all) employers provide loans on 401 (k) accounts. If you do, you will be able to take out half of your balance up to $ 50,000 with five years to repay the loan. Of course, money borrowed does not get interest for your retirement. (For more information, see Sometimes you should charge for a 401 (k) .)
- Friends and family-Borrowing from people you know can strain relationships. However, if you need a small amount for a short period of time and you can return it, this option may be for you. Offer to pay reasonable interest on the «loan», since it is likely that you will borrow money from another interest account.
- Bank / Credit Union Cash — Many banks and credit unions have overdraft protection or cash. Although more expensive than installments, these options are cheaper than a payday loan. Check with your Bank or credit Union to find out what’s available and sign up-just in case.
- life insurance Loan — Many life insurance policies provide loans if you have a monetary value in the policy. Best of all, you have your entire life to repay the loan. If you don’t return it, the insurance company will deduct the credit from the death benefit.
- Online options-Sites like LendUp offer loans, Finance education, and even the ability to rebuild a damaged credit rating. One-time loan sites like Prosper and Lending Club also offer alternatives that are cheaper than payday loans. (For more information, see the 7 best peer-to-peer lending websites .)
- pawn Shops — If you have something of value that you can use as collateral, a pawn shop can be a source of credit that is worth considering. The financing fee depends on the location, so make sure you know what the cost of borrowing will be.