SALARIES / DEC. 30, 2014
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Alternatives to Payday Loans When You Need an Immediate Solution

You can have a job and work hard, but this doesn’t mean you’ll always have enough cash to get through the month. The mortgage and other bills might be due in the next couple of days, yet you don’t get your paycheck for another week. Some people use a credit card or take money from savings, but if neither is an option, you might consider a payday loan.

A payday loan is a cash advance that uses your future paycheck as collateral. These loans can provide fast cash in a jam, and you can apply in-person or online. If your back is up against a wall, this might seem like the only alternative. Unfortunately, payday loans can be extremely risky. These loans feature higher interest rates, and funds have to be repaid in full within two weeks.

Besides, you need your hard-earned cash, and the last thing you want is a payday loan complicating your finances. Here’s a look at four alternatives to getting a payday advance.

1. Ask your employer for cash in advance

Depending on where you work, your employer might be able to give an advance against your paycheck. Of course, you shouldn’t abuse this privilege by asking your employer for an advance every month or several times a year. But if you’re in a unique situation and need cash, speak with your employer in private. He might be able to write a company check for the amount you need today, and then deduct this amount from a future check. You can get the cash you need to handle an expense – but unlike a costly payday loan, you’re using your own money and getting an interest-free loan.

2. Pawn or sell items 

There’s probably plenty of items in your home that you don’t need or use anymore. You might have old or broken jewelry sitting in a jewelry box, or one too many televisions in your house. Taking stock of your assets and liquidating some of your merchandise can offer a solution to your problem, especially if you only need a couple hundred dollars to tide you over. Sell these items and get the cash you need without fooling around with an expensive loan. Or if you’re absolutely sure that you’ll have enough cash on payday, you might pawn an item and get a short-term loan.

3. Ask creditors to adjust your due date

Believe it or not, many of your creditors are your allies. They don’t want to charge late fees or get into a collections war with you. If you have a bill that’s due soon, but you don’t get paid until next week, call you creditors and explain the situation. You may discover that creditors are more accommodating than you think. As long as you keep them in the loop and you don’t hide, they may offer a payment extension, reduce your payment or offer a skip-payment option.

4. Apply for a short-term small bank loan

A payday loan is one way to get cash with no credit check or cosigner. But consider how payday loan rates are higher than other lending options, you’re better off going to a bank or credit union and getting a small short-term loan.

Of course, there are requirements to getting a bank loan. You need good credit, and you must have some type of collateral. If you meet the criteria, you might qualify for a short-term loan with a reasonable interest rate.

In most cases, banks can approve and issue short-term loans within a couple of days, or sooner. Get your check from the bank, and then pay off the loan as soon as you receive your paycheck, or over the course of a few months — whichever works better for you. You’ll not only receive a better rate, banks also report to the credit bureaus. So, if you pay off the loan and satisfy the terms of the agreement, this adds positive activity to your credit report and raises your score. 

A payday loan might seem like the only alternative, but it is risky business when you start gambling with your paycheck. There are other ways to get the cash you need without dealing with crazy high interest rates.

Photo credit: Flickr

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