When you are desperately in need of money and exhausted all other options for short term loans, you may consider turning to payday loans to solve your cash flow problems. But these types of loans can be very expensive and you may end up paying upwards of $300 in fees on a loan of $1,000. If you fail to repay on the due date, then you may incur late payment fees and additional interest. Although payday loans can be obtained with relative ease, they are often more costly than many other types of short term loans. For this reason, you should explore other cheaper options before settling for payday loans.
Here are 3 payday loan alternatives that are worth considering:
- Ask your employer for an advance: If you have a considerate employer, then asking him or her for an advance on your salary can be a far better option than most of the other types of short term loans. This would essentially be a payday loan, but without the high interest rate and fees. Some generous employers are willing to forward an advance without any charges while others may make a small cut in your next salary or ask you to repay over multiple pay periods. If you work in a small organization, you may talk to the boss directly; otherwise, you can ask your immediate superior or someone in the human resources department.
- Bank overdrafts: Instead of taking out a payday loan, you can ask your bank to provide you with a small overdraft limit. The bank may charge you an administration fee, an arrangement fee and a monthly fee along with interest. Despite these multiple fees and interest, a bank overdraft could still be cheaper than a payday loan. The downside is that the bank may choose to cancel your overdraft facility at any time and ask you to pay up immediately. Also, you will have to be careful not to exceed the overdraft limit as the penalties for doing so could be very high.
- Credit Unions: Borrowing from a credit union could be your best short term loan option if you are a member. These non-profit community based organizations are formed to help their members manage their money and offer savings, loans and current accounts to their members. If you have a steady income and can afford to pay, then your credit union may be able to lend you small amounts of money. Because of the non-profit nature of the organizations, they often have minimum fees and interest, which make them popular choices for members.
In addition to these, there are several other payday loan alternatives you can explore. You could do a side job or work overtime if your employer allows. You can try to sell personal belongings that you don’t need anymore. You can borrow from a friend or relative if they are willing to help you out. If you have an outstanding loan, you could ask the lender to extend the due date. The bottom line is that you should consider all available options before applying for a payday loan.
Remember, even these payday loan alternative should be used only for short term cash emergencies. You should not rely on advances, loans from friends, or overdrafts. If you find yourself short on cash on a regular basis, it’s time to look at your budget. Contact the team at Credit Counselling Services of Atlantic Canada for personalized advice on creating a budget that allows you to live within your means.