Don’t Let Online Payday Advances Leave Better Options Ignored
Online payday advances are there for you in a pinch, but don’t ignore other options because they may be better for your financial well-being. If you’re in a financial emergency and in need of a loan, consider your options before entering into a borrowing agreement. Don’t let online payday advances leave better options ignored. There are others that may save the day and your financial future.
Borrowing Options that are Better than Online Payday Advances
Investopedia published an article recommending personal installment loans, bank or credit union cash advances and loans from retirement accounts as good alternatives to online payday advances. The finance site also pointed out the benefits of borrowing money from friends and family, life insurance policies and online lenders.
Why an Installment Loan May Be the Way to Go
This type of loan is unsecured, and you’ll apply for one through a traditional financial institution such as a bank or a credit union. With an installment loan, you’ll have at least 90 days to pay the money back. Also, you can get one without putting up collateral.
The lenders of installment loans limit rolling them over into new loans with new terms. These lenders will also look into your ability to pay the money back by assessing your sources of income before lending you the funds. For many people, installment loans are a long-term financial solution.
Bank or Credit Union Cash Advances Can Help if Your Borrowing Choices are Few
Most banks and credit unions offer overdraft protection or an overdraft line of credit. While borrowing funds this way through your bank may be pricier than an installment loan, it is likely to cost less than online payday advances. The trick here is to sign up for the service before you need it, so check with your financial institution about their overdraft protection services.
Consider a Loan from Your Retirement Account
If you’re looking at a serious financial shortage, then borrowing money from a retirement account is an alternative to taking out an online payday advance. If you have an IRA, then you can withdraw funds from it annually without incurring a penalty as long as you pay the funds back within 60 days.
Some employers allow their workers to take out loans against their 401(k) accounts. Keep in mind that if you do borrow from your retirement account, then you won’t be earning interest on the withdrawn funds.
Life Insurance Policies are a Unique Borrowing Option
If you have cash value in an insurance policy, then your insurer may allow you to take out a loan against it. The nice thing about borrowing money this way is that you can pay it back later. Also, if you’re not able to repay it, then the company will just take it out against the death benefit.
Online Lenders are Becoming a Major Player in the Financial Sector
Online lenders are offering loans to help people with their educations. Some will even help borrowers rebuild marred credit scores. If you search the internet, you’ll come across lenders that provide affordable loans.
Borrow Money from an Affluent Friend or Family Member
When you borrow money from someone you know, it can put a strain on the relationship. So, consider this option carefully. If there is someone in your life who is financially comfortable and you know that you can pay a small loan back quickly, then go ahead and ask this person for money.
To keep your relationship in good shape, offer to pay a fair interest rate, and be sure to pay it back when you say you will. If you fail to do so, then you’ll likely create tension in your relationship.
There is Such a Thing as a Payday Alternative Loan
The Simple Dollar reports that a payday alternative loan, or PAL, is a good borrowing option for you if you have debt that you owe. This type of loan is also recommended for customers with credit difficulties. Backed by the Federal Government, a PAL is designed to help you if you are currently dealing with payday loan debt or in need of emergency cash.
What You Should Know About a PAL
PAL loans range from $200 to $1,000. They also feature loan payoff terms that are from one to six months. Expect to pay a processing fee of as much as $20 as well as an annual percentage rate, or APR, of around 28 percent for this kind of loan.
To qualify for a PAL, you must be a member of a federal credit union for a month or more. Also, a PAL cannot be rolled into another loan, so you will need to pay it back by the due date.
How Your Credit Score Plays into a Loan
NerdWallet reports that a borrower’s credit score affects the interest rate that the individual will be required to pay for a loan. A person with poor or average credit may qualify for an unsecured personal loan based on their having a steady source of income and little debt.
When lenders say that they offer loans for those with bad credit, interest rates for these funds are usually around 300 percent annually or more. Borrowers with poor credit may receive the money that they need, but they will likely pay annual rates that are around 36 percent for the loan.
There are Alternatives to Online Payday Advances
Online payday advances are convenient and in most cases, easy to get. They are also processed fast. Lending companies that work in this sector often deposit payday loan funds within one or two business days, but don’t ignore better options for the ease of payday loan funds. Be sure to take some time to shop around.
A payday loan alternative may provide the funds that you need with payment terms that work for you. To learn more about payday loan alternatives, visit the Personal Money Store.