When money is tight, a payday loan promise of fast money with no questions asked can seem attractive on paper, but is it the only option?
Data shows that 14 percent of people polled would choose a payday loan over using a credit card, personal loan, or turning to friends and family in a financial pinch. Unfortunately, the astronomical interest rates associated with payday loans often mean that people get stuck in a cycle of needing to continually borrow to stay afloat.
The good news is that if you find yourself in financial hot water, you can borrow money without becoming yet another victim of predatory payday loan practices. Here are some alternatives to consider.
Payment Plan
Before taking out a loan, you should see if there’s a way to make your situation more manageable. If a credit card or loan payment is jeopardizing your ability to pay for basic expenses, you may be able to work out a deal with your creditor. You might be surprised how much they are willing to work with you on a payment schedule.
Personal Loan
Banks have a reputation for not being the fastest, but don’t forget to consider your local financial institution when you’re in a pinch. If you need funds for a specific purpose, a personal loan can be a much more inexpensive alternative to a payday loan.
You aren’t limited to brick-and-mortar institutions however. Online lenders allow you to see what rates and terms you qualify for without performing a hard inquiry on your credit, and can get funds in your account in just a few days if approved.
401(k) Loan
Though typically not recommended if you can avoid it, tapping into your 401(k) is actually one of the most cost-effective ways to get yourself out of financial trouble. According to Investopedia, taking money out of your retirement account should be one of the first options you consider when you need short-term liquidity.
Borrowing against your retirement fund doesn’t incur taxes as long as you follow the rules, and it doesn’t require a credit check. You are free to pay your interest back on your own account, and as long as the loan is paid back within a year or so, the long-term impact on your retirement should be minimal.
Borrowing money on short notice is never an ideal situation. Sometimes things happen that are out of your control, and it is important to be as smart as possible to avoid the sky-high costs of a payday loan.
We are determined to ensure you have the tools necessary to avoid future financial distress, and we strive to help you establish a debt free life with the peace of mind that comes with financial security.
To find out more about our payday loan consolidation services, or to schedule a complimentary consultation, contact us today
