Best Alternatives to Payday Loans

Loan

Let’s accept the fact that borrowing money from an unauthorized lender is not the most ethical way to do business. Lending money is a business and someone who doesn’t follow proper ethics can never become a good partner. Payday loans are short-term cash loans offered by keeping your bank account details as collateral. Lender’s ability to recover the borrowed money has made payday loans work until now.

In some cases, a lender also demands a post-dated check of a sum of borrowed money, interest and finance charges. If you fail to pay up in time, the lender will either encash the check or withdraw money using your bank credentials. This is highly risky. It is imperative to remember the alternatives to payday loans as you don’t know when you will need emergency funding.

Here are the best alternatives to payday loans.

1. Apply for an Unsecured Personal Loan

Unsecured personal loans might seem risky for the lender but for you, they are the best alternative to a payday loan. You don’t need to put your house on the line to borrow money from a personal loan lender.

Usually, the lender’s trust people with a stable job, belonging to a good family, a decent career, decent social status, etc. Having these qualities make borrowing money a piece of cake. Lastly, you also don’t have to worry about credit history to get a personal loan.

2. Borrow money from family or friends

Borrowing money from family members and close friends is an age-old way of getting yourself out of a jam. There is nothing wrong with asking for money to your family members or friends. Just make sure you give a good reason. Asking for money from your friend to buy the new watch or an iPhone is not considered ethical. You will destroy your friendship as you are taking someone for granted and using them to fulfill your cravings.

3. Use your Credit Card

It is possible to borrow money from your credit card. You heard it right. And I am not talking about using your credit card to purchase stuff. You can swipe your credit card at any nearest ATM to withdraw cash. Bear in mind that this service is only supposed to be used in emergencies. Especially in times when you don’t have any cash in your bank account, you lost your debit card and need urgent cash, etc. The interest rates on cash withdrawn using your credit card is a bit high.

4. Borrow money from a credit union

Credit unions are non-profit organizations where members offer to help one another. The interest rates on loans are also quite low(approximately 3 percent).

Moreover, the Prudential Regulatory Authority and the Financial Conduct Authority are responsible to regulate these credit unions. So, whenever you are need of some cash, find a credit union present in your region/church/apartment building/condominium and reap its benefits.

Summary

So, next time you are in an emergency and need of some cash, think about the following alternatives:

1. Apply for an Unsecured Personal Loan

2. Borrow money from family or friends

3. Use your Credit Card

4. Borrow money from a credit union

These are far better than a payday loan. A payday loan does not let you repay on your terms. Plus, you have to pay back a lump sum amount which includes interest and finance charges.