There are a million reasons you might find yourself needing extra cash. Maybe you have medical bills pop up, or a car repair that can’t wait. Maybe you just want to finish up a home improvement project. Whatever the reason, there are a lot of ways you can get your hands on the extra cash. DON’T take out payday loans. Instead, take a look at all the types of loans to consider before you turn to payday loans.
Types of Loans to Consider Before You Turn to Payday Loans
Payday loans range from $100 – $1,000 are unsecured loans, meaning there is no collateral.
The Trap of Payday Loans
If you’ve ever seen a commercial for a payday loan company, they can make it seem very attractive. You don’t have to wait for your paycheck, and you get the cash you need immediately.
What’s so wrong with that?
The problem is the cost! Not only are they going to have several fees tacked onto the loan, but the interest rates are mind-blowing. Some of them are as high as 400% APR.
If you were to get a single payday loan, you could end up paying triple what the size of the loan was. If you got a loan for $100, you’re going to pay around $10 – $15 every day for that loan. Sure, you get the cash you need, but that loan is going to cost you WAY more than it’s worth.
Now you know why you should avoid them, but where else should you look?
A personal loan is an obvious choice before resorting to a payday loan. Personal loans are the traditional route for getting extra money. Just like with a payday loan, personal loans are unsecured, meaning you won’t lose your house or car if you can’t make the payments (but we certainly don’t suggest not paying back the loan).
They can range in size depending on the bank you use and how much you need.
Personal loans have a “repayment term,” which is how long you have to pay back the full amount of the loan. The loan will also have a fixed interest rate, meaning it isn’t going to fluctuate the closer you get to the payoff date.
2) Credit Union
Going to a credit union isn’t another TYPE of loan, but it could give you a better chance of getting approved for a personal loan.
Most people don’t fully understand the difference between banks and credit unions, but when it comes to personal loans, there can be a lot of differences.
First of all, credit unions tend to offer better rates on their loans, which means more money in your pocket. Likewise, they could have lower credit standards.
Something to keep in mind, in order to get a personal loan from a credit union, you have to be a member. You will have to live or work in the city where the credit union is located. There are a lot of great credit unions out there, you should look at your options before choosing one.
P2P lending is not an extremely common method for getting a loan, but it should be on your list when you’re looking to get some cash.
There are a lot of P2P lending sites out there. Each of them is slightly different, but all of them are similar.
If you need a loan, you create an account, apply for a loan, and then several people will contribute to the loan.The application process with Lending Club (and other P2P sites) are just like with a traditional loan. You’ll have to provide a lot of financial records and they are going to check your credit score.
One advantage of P2P sites is the interest rates. Most of them are around 6.25%. Also, you can fill out the info in your own time. You don’t have to worry about to going to a physical office during business hours.
4) Credit Card
Credit cards have gotten a bad rap for loans, but they are an attractive alternative to payday loans.
If you have an expense you don’t have the money for, like a medical bill, and you have a credit card with enough balance, you’ll get better rates with a credit card than with the payday loan.
A lot of credit card companies offer much lower interest rates for those who transfer debt or for the first several months after they open the account. This can be a good way to get the cash without paying an outrageous rate.
An added bonus of using a credit card to pay off some of your bills is you can get some cash back rewards as well.
5) Family Member
You may not like the idea of turning to a family member for money, but it is a much better idea than a payday loan. Not only will you save yourself tons of money in interest, but you will also be highly motivated to pay the loan back.
These two reasons alone should make you willing to swallow your pride and ask a close family member to help you out.
Avoid PayDay Loans at ALL Costs
Payday loans are a terrible option and are the equivalent of investing $10,000 of your retirement money in the lottery. If there is any way you can avoid them, you should. Take this article to heart – be sure to review these loans to consider before you turn to payday loans.
Sell your old things, find some spare work. Whatever it takes. Find some ways to make the most of your monthly money. Trimming down your spending or finding extra money in your lifestyle can go a long way.
There are a lot of places you can get the money you need before you ever walk into a payday loan office.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.