Alternatives to Payday Loans

There are many other options when considering a payday loan. If you sit down and mull over all the factors about payday loans, it might lead you to a wiser decision.

When you are looking for credit, please shop carefully. Look closely and compare offers. You should always look for the credit offer with the lowest APR. For some that might seem like the most obvious decision, but not everyone knows this simple well-known fact. You should first consider a small loan from your credit union or a small loan company before choosing a payday loan. You could even ask for an advance on pay from your employer or possibly a loan from a family member or a friend.

There is also the option of taking out a cash advance on your credit card, but sometimes that can have such a high interest rate that you might as well just take out a payday loan. Here’s an example of a comparison of charges between a payday loan and a cash advance from your credit card. Let’s say you take out a $300 cash advance on your generic, average credit card and when repaid in one month it would cost you $13.99 in finance charges and an APR of close to 57%. In comparison, a payday loan costing $17.50 for every $100 you borrow for the same $300 would cost $105 if renewed one time or 426% APR. Quite a difference, huh?

You should always compare the APR and the finance charge (this also includes loan fees, interest and other types of credit costs) of different credit offers to find the lowest cost to you.

Another route you could take is to ask your creditors for an extended time to pay your bills. First find out if you’re eligible for such an extension and then find out what they will charge you for that service. It’s possible they’ll simply charge you a late fee, an additional finance charge or even a higher interest rate. Yet, this still might be a better choice than going immediately for a payday loan.

It would also be a good initiative to make a realistic budget for yourself or you and your family. Figure out your monthly and daily expenditures. It is quite easy to avoid unnecessary purchases; this includes daily activities such as buying lunch everyday, using your cell phone constantly for every phone call, shopping on a daily basis. A lot of people don’t realize how much money they spend on a daily basis just because of small purchases they make throughout the day. Because they aren’t spending a big chunk of money at one time, they seem to forget everything else they purchased earlier in the day. These costs add up. It’s also wise to build up some savings- even small deposits here and there can help eventually. This helps to avoid borrowing for emergencies, unexpected expenses or even to purchase other bigger items. This definitely eliminates the need for a payday loan.

Find out if you have overdraft protection on your bank or checking account. Making a small mistake in your check book can easily add up to hundreds of dollars quickly. If you regularly use most or all of the funds available in your account it is very smart to get overdraft protection.

There are local consumer credit counseling services that will help you to work out a debt repayment plan with creditors or to develop a budget. This could be helpful if you have already made the mistake of taking out a payday loan and are in desperate need of learning how to pay it back. Every state usually has non-profit groups that will offer credit guidance to consumers. Generally these services are offered at little or no cost, which makes it quite irresistible. You should also check with your employer because sometimes credit union or housing authorities offer no or low cost credit counseling programs as well.

If you finally decide that you absolutely must use a payday loan, it is very wise to use only as much as you can barely afford to pay back with your next paycheck and still have enough money to make it to the next payday. Otherwise you will be paying on that payday loan for a long, long time to come. This could also eventually affect your credit score negatively.