Finding smart alternatives to payday loans can be a great way to avoid financial disaster down the road. These loan companies have spread across the country. They advertise quick and easy loans for customers with low incomes and bad credit, but what they don’t tell you is that they are financial predators.
Many Americans live pay check to pay check, and someone who needs a quick loan to cover bills is likely to also struggle repaying loans with the insane interest rates these companies are charging. Many are forced to borrow money simply to get out of debt, which can create a toxic cycle that pushes borrowers deeper and deeper into financial trouble.
It might seem like there are times when making a deal with a payday lender can be your only option, but the fact is that there are alternatives that are much better for your financial health. Let’s take a look at just a few of the other options. We’re going to start with the assumption that you are already doing what you can to budget and cut expenses, but if you haven’t done this, you should always start there. Budgets are a necessary step in the road to financial freedom.
5 alternatives to payday loans:
- Borrow from friends and family: Nobody wants to make that hard call to their mom, brother or college roommate. It can be embarrassing, and you run the risk of causing hard feelings. If possible, we all want to avoid this. Many, however, end up turning to loved ones down the road when payday lenders have left them with no other choice. Rather than signing a vulture deal with payday lender, go to these people first. Emergencies are unfortunately part of life.
- Research online lenders: Some online companies offer short-term loans for borrowers with poor credit. Most of these companies will have rates better than you will find from a payday lender, but do your research to ensure that you make the right choice.
- Sell off possessions: Anything you can possibly do to avoid seeing a payday lender should be on the table. This includes selling off valuables that aren’t essential to daily life, such as electronics or jewelry. You can always buy these items again down the road, and unlike payday loans, you will not have to rush to escape massive interest rates. It’s easier to go a few months without your TV than it will be to juggle a potential personal bankruptcy.
- Pull from retirement, insurance or other resources: You take a hit when you pull from your retirement or insurance. This money might come with taxes or loss in future income, but if you have these resources, tapping into them is far better than seeking a payday loan.
- Use credit cards: Credit card debt is by no means an ideal financial situation, but it is still far better than a payday lender. If your other options run dry, exhaust your credit card limits before considering a payday lender. The interest rates tend to be better on consumer debt than payday loans.
Payday lenders are getting increasing attention in the media for their predatory practices towards borrowers. These are only a few of many alternatives to these companies. The idea is to exhaust every reasonable option, no matter how uncomfortable, before you turn to deals like these.
Kevin D. Judd is a D.C bankruptcy attorney who is determined to help his clients find financial freedom.