If you are behind on your bills or are drowning in credit card debt, chances are you might have been tempted to take out a payday loan. A payday loan is typically a loan between $100 to $500 that you have to pay back from your next paycheck. But, payday loans can be more damaging than they are helpful since many have interest rates that exceed 400%.
Payday loans are a short-term borrowing solution where you obtain a high-interest loan based on your credit profile and income. They may also be referred to as check or cash advance loans. The loan amount is usually a portion of your next paycheck. As mentioned, these loans can carry crazy interest rates for short-term borrowing.
Some individuals can not afford to pay payday loans off within a couple of weeks. So, they either roll the loan over or take another payday loan out to pay off the first one.
Issues with payday loans
If you can pay a payday loan back on time and it is a one-time loan, there should be no problem with getting a payday loan. However, the reality is that the people who payday loans target are likely to already be financially unstable, which already makes them high-risk loans. An estimated 12 million Americans use services like these each year. Many have trouble making ends meet or are living paycheck to paycheck. Payday loans may offer them very temporary relief from their financial struggles, but in the long term, the glaring issues with these loans raise a number of red flags.
There are alternatives you can try rather than taking out a payday loan.. They include:
Borrowing from family and friends
Don’t be afraid to borrow money from your friends and family. Avoiding payday lenders and reaching out to those who care about you can be a great strategy. A lot of people feel that asking for money from their loved ones is a sign of weakness, but that’s far from the truth.
Many middle-class and working-class Americans are not in the best financial health. No matter how things appear on the surface, financial difficulties can happen to anyone. Your loved ones do not want to see you suffer and may well be able to help you out during these times.
Borrowing emergency money from a family member or a friend can help you avoid the risks that go with payday loans.
But do make sure that both you and the person you’re borrowing from take the time to:
- put your agreement in writing
- work out a budget and a repayment plan
- discuss what will happen if you’re late paying it back or don’t repay it at all.
Borrow From a Retirement Plan
Do you have a 401K or other kind of retirement plan set up? If you are in dire straits, borrowing from this can help you. Any money you take out of your retirement plan will not need to be paid back but you will need to pay income taxes on it.
While this is better than payday loans, you should try and make sure that you pay the amount back into your retirement plan when you’re better off. You do not want today’s financial issues coming back to haunt you when you’re retired and don’t have a steady income.
Sell Your Stuff
Sometimes coming up with quick cash just requires a little creativity. One thing you can do is sell stuff you no longer want or need. Now is the time to declutter and get rid of everything that doesn’t spark joy! If you don’t really use it that much, let it go.
You can sell your items on Facebook Marketplace, OfferUp, Poshmark, and Craigslist. Just think: Getting rid of your stuff can be just the thing you need to bring in some more money, helping you avoid a payday loan.
Earn Extra Money with a Side Hustle
Cutting back is the first thing you should do if you need extra cash. But if you’ve cut back all that you can, your next step is to earn more money. If you have free time, you can start side hustling. A side hustle is a gig that you do on the side to earn more money. I worked as a brand ambassador and freelance writer as a side hustle while I was paying off debt.
There are many side hustles available, including babysitting, graphic design, dog walking, Uber, Postmates, etc. Find your passion and zero in on your skills.
A Personal Loan
A personal loan can be used to cover just about anything. And interest rates on personal loans are a lot lower than on payday loans. Rates for many personal loans are even lower than on credit cards. Granted, you’ll pay a higher rate if you have a poorer credit score, but a reputable personal loan lender still won’t charge 400%.
Personal loans offer a lot of flexibility. They can be used for just about anything, and they’re unsecured loans — meaning you don’t need to put up collateral, like a house or a car. Personal loans are an excellent alternative to the cycle of Pay Day loans.
Where to start if you need a payday loan alternative?
If you’re in need of a cash advance, consider a Payday Loan Alternative like KwikCash. We offer personal loans up to $2,000 depending on your state. All you have to do is select how much you want to get started and let us take care of the rest.