With a payday loan, you can effectively borrow against your forthcoming earnings, even before you’ve earned them. This might seem like a tremendous boon if you’re facing an urgent, short-term, cash flow issue. You may be poised to have your utilities cut off, or you could be struggling to buy groceries. No matter what your current financial woes are, there’s likely a far better solution.
Why Payday Loans Aren’t Ideal
Payday loans are the epitome of predatory lending. These funding products are specifically designed to target high-risk, low-income consumers. Sadly, a lot of consumers who earn more than enough to meet their financial needs often wind up using these products due to poor money management. Because these loans are structured specifically to accommodate borrowers with low credit and an inability to qualify for more conventional funding types, they always come with excessively high interest rates and fees. Moreover, payday loans also have rapid turnaround times. When you use them, you’ll have to restore everything that you’ve borrowed, plus the associated interest and fees, before you have the chance to get back on your feet.
This can put people in the position of living hand-to-mouth, even if they were far from living this way to begin with. In fact, a lot of people wind up using payday loans in a revolving door fashion. Ultimately, the very nature of these products can trap people in a vicious cycle of borrowing and repaying. So, what are your options when you need an alternative to payday loans?
Car Title Loans
Car title loans are an alternative to payday loans that are also structured for high-risk consumers. With these, rather than leveraging your forthcoming paycheck, you’ll actually be leveraging your car. Much like payday advances, car title loans also entail significant fees and incredibly high interest rates. Worst of all, if you default on one of these loans, you’ll wind up losing your vehicle.
Creating a Rainy Day Fund
The absolute best alternative to payday loans is simply making sure that you’re prepared for the unexpected in advance. You can do this by stashing away nominal amounts of cash, every time you get paid. This way, when problems arise, you’ll have plenty of money squirreled away for taking care of them. Best of all, you can use these funds without having to pay interest or fees, and without having to risk losing your sole form of reliable transportation.
Using Your Credit Card to Get a Cash Advance
Although creating a rainy day fund is an excellent way to prevent cash flow issues from occurring, this tip won’t do you much good if you’re only recognizing its value in hindsight. Another way to get quick cash when you really need it is to use your credit card to get a cash advance. Keep in mind that getting even one cash advance on a credit card can cause your interest rate to soar. As such, you should carefully read the terms and conditions of your card before using it this way. It’s a good idea to have at least one credit card stashed away that’s solely reserved for emergency expenses, especially while you’re still building your rainy day fund. This way, your credit limit won’t be exhausted, and you won’t have to pay the short and long-term costs of getting a cash advance.
Far cheaper than payday loans or credit advances is simply selling off assets that you don’t truly need. If you’ve got pressing bills and are unwilling or unable to take on a new debt, think about offloading a flat-screen TV, a gaming system, or any other high-value electronics that are busy collecting dust. You definitely don’t need these things as much as you need running water, working lights, gas in your car, or food on the table. With good money management, you can always decide to replace these things at a time when you can comfortably afford them.