SHOULD I CHOOSE A PAYDAY LOAN OR A PAYDAY LOAN ALTERNATIVE?

There may be a time when hard-working people are faced with a financial emergency or an unexpected expense. At the point when YOU’RE STRAPPED for money, a payday loan where you can receive quick cash may seem like a good option, and it may be, but they aren’t your only choice. Everything in life has it’s place, and maybe a payday loan will work best for you. However, it is important to understand that there are payday loan alternatives.

Before you take out a payday loan, always consider other alternatives.

Alternative # 1 – Peer-to-Peer Lending

Peer-to-Peer lending is a creative form of borrowing-and-lending that takes the banks and institutions out of the picture. This allows borrowers to connect directly with individual lenders who invest in unsecured personal loans and small business loans. A P2P platform does not make loans. They act as a central marketplace matching lenders and borrowers.

A borrower with less than perfect credit can often get peer loans faster and at a lower interest rate than a bank can offer. The individual lender makes money by earning interest on the money they lend just like a bank.

Prosper.com and LendingClub.com are two P2P loan companies that have been around for over a decade. To start, it’s worth getting a quote from one of these two sources as well as others. Always do your research by checking Better Business Bureau and read reviews from reputable sources.

Employee Advance

Alternative # 2 – An Advance from your Employer

A good payday loan alternative is asking your boss for a cash advance against your next paycheck. If you need more time, then it is best to discuss payment terms with your boss that you can both live with. You may want to explain what the financial emergency is so your boss understands your situation. Show your boss you are serious about getting your finances in order and offer to work extra shifts or hours.

Alternative # 3 – PAL Payday Loan Alternative

The National Credit Union Administration (NCUA) allows and regulates federal credit unions to offer small-dollar loans called Payday Alternative Loans or PALs. Borrowers need to be a credit union member for at least one month to qualify. PAL allows members to borrow small amounts at a lower cost than payday loans and repay the loan over a more extended period.

Poor credit scores may not affect a credit union from granting a PAL. They are looking for consistent income and ability to repay. Loans can be between $200- $1,000 with repayment terms of one to six months. Not all Credit Unions offer Pals, and if they do, you might not be eligible.

PAL Benefits over a payday loan

*The annual percentage rate of 28%
*Application fee $20 or less
*Clear rates and terms
*No credit score requirements
*Generally, report to major credit bureaus

borrow from friends and family

Alternative # 4 – Friends and Family

 

Borrowing money from friends and family can put a strain on your relationship. If you decide to go this route, do it the right way. First, choose how much you need and how you are going to pay it back. Discuss these details, put together a payment schedule, and agree on an interest rate. Put it in an agreement, and both parties should sign it. To keep your close relationships in good standing ALWAYS pay back your loan on time.

Alternative # 5 – Credit card cash advance

Think of it like this…you are using your credit card to “buy” cash. Your credit card may have a cash advance option that allows you to get a short term cash loan at ATM or bank. If your credit card has a cash advance option, it will have a limit that is likely lower than the total credit available to you. Getting a cash advance is easy and fast, but it is one of the most expensive types of credit card transactions.

Alternative # 6 – Borrow from a retirement account

Some 401(k) plans allow you to borrow a portion of your vested account balance and there is no credit check because you are not borrowing money from another party. However, you may still have to pay interest or fees. The Internal Revenue Service limits 401(k) loans to $10,000 or 50% of your vested account balance, whichever is higher with a cap of $50,000.

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