Payday Loan Alternatives You Should Consider First
A payday loan can be a useful tool in the right circumstances, but it can also lead to problems if you’re not careful. Many people who decide to use a payday loan to get out of a problematic situation often underestimate the difficulty of paying it off. It’s not impossible to repay, sure – but you have to be prepared and know what you’re getting yourself into.
On top of that, a large number of people also tend to rush into the decision to take out a payday loan without even bothering to consider the other options available to them. Which is unfortunate, because in many cases, there is something better that can be done instead of going straight for a payday loan. Let’s take a look at some of the options that you might be forgetting about.
Look Around More
It might sound obvious, but you’d be surprised how many people fail to simply do their homework properly before deciding to go for a payday loan. Just because you think that you’re ineligible for a regular loan doesn’t make it true – so go talk to a bank if you haven’t yet. In many cases, banks might be willing to overlook certain issues on your record – like a bad credit score – if you can explain the situation and convince them that you’ll be able to pay off your loan on time.
And even if you do decide to go with a payday loan, don’t just go for the first offer you come across on the market. Take your time and find out what conditions the different lenders in your area can offer you. Sometimes, you will realize that you were about to miss out on a potentially great deal.
If you have any credit cards available, consider using them before going for a loan. In the end, a credit card is still a line of credit, and it can give you some extra freedom in emergency cases where you can’t make ends meet. However, credit cards are not really designed to be used as a substitute for ordinary loans. Pay attention to all special conditions attached to your card(s), and make sure that you don’t go over any critical limits.
Otherwise, you might find yourself in an even more challenging situation than the one you were originally in. It’s actually not rare at all to hear about people who’ve gotten in financial trouble after trying to cover one line of credit with another.
Friends and Family
An option that you might feel uncomfortable relying on, but still an option nevertheless. If you can borrow from any friends or family members, you should probably go for that instead of taking out a regular loan. It might feel awkward doing this, especially if it’s the first time you have to do it, but in the end, it’s better than dealing with a bank or another creditor and facing the possibility of defaulting on a loan.
If you do decide to go for this option though, make absolutely sure that you’re prepared to pay that money back. Otherwise, you risk straining your relationship with people who care about you.
Tax Refund Loan
A tax refund loan is often a good option when you need urgent cash and are willing to forego a portion of the money you’d receive from your next tax return. The way these loans work is by giving you a sum of money calculated based on your anticipated next tax return. The good thing is that you don’t really have to “repay” anything in the end – you’re just getting access to money you would eventually have anyway, and taking a small financial hit for the convenience.
However, don’t do this if you’re not absolutely certain about the expected value of your tax return. If you overshoot and end up getting less on your return, it won’t be the lender’s problem to cover the difference. They’ll still expect you to pay back the loan in full, which can put you in a slightly uncomfortable situation if you’re still short on money. However, if you do have the possibility to verify your tax return from top to bottom – e.g. if you’re friends with a good accountant – this option can work out very well. Unfortunately, it’s a one-time thing, as you can’t borrow against your tax return more than once. If you get hit by another financial problem later on, you might find yourself out of options and forced to take out a payday loan anyway.