A payday loan is:
- A short term loan
- Unsecured (not backed up by any security)
- Amount is small
- Payable on the payday usually from the debtor’s wages
- Depends upon the previous wages
- At a comparatively higher interest rate
Payday loan is also known by the names like cash advance loan, salary loan or payday advance.
Payday loans are usually available on very high interest rates. So, it would not be wrong to say that they are causing more problems to the debtors than they are solving. Most importantly, it will disturb your credit score if you are unable to pay back the loan. But there are a lot of people who need cash before salary so they go for this option. But there are some better payday loan alternatives that may be better than the payday loans.
- Getting a debt from your friends or family:
If you want to pay your medical bill, want to buy some grocery or meet some other need, you can also take help from your family or friends. But you should write down the agreement with all the terms and conditions of borrowing.
- Asking for a loan from your employer:
A better way will be to ask for the advance money from your employer than asking the same money from a payday lender. Essentially, you will have to pay it back but it will be deducted in installments from your future salaries. You will not have to pay interest to your employer.
- Using your credit card as a loaning facility:
The best option is to use your credit card to take the loan if you have one but make sure to pay back the full amount as it comes due.
- Social funds and food stores:
Social funds and food stores are good alternatives to meet your short term money needs. Food stores offer you food if you are struggling to make the ends meet. When you have food for yourself, you can use your money for other purposes. Similarly, social funds offer your interest free loans to fulfill your expenses.
- Local welfare programs:
One of the payday loan alternatives are the local welfare programs. Many communities have arranged for these local welfare programs that can give you money to help in difficult times. If you are having an option like this in your community, do go for it. This option is a lot better than the payday loans.
- Getting help from credit unions:
Credit unions also provide a good option to borrow money. They are much better than the payday loans because their interest rates are lower. They cannot charge high interest rates like payday loans because there is a check on their interest rates. Good news is these credit unions also offer loans to the people with bad credit score. If you become a member of the credit union, it will become easier for you to get the loan.