Payday Loan Alternatives – There are More Than You Think

A low FICO score or history of late payments prevents many Americans from obtaining low-rate loans through traditional methods, such as credit cards and unsecured bank loans. When faced with bad credit and an immediate need for cash, payday loans are a convenient option for taking care of surprise expenses. However, payday loans are not the only option for small loan financing when your savings account has been depleted. For smaller loans, these six cash advances can see you through a tight spot:

1. Apply for a Secured Personal Loan

Credible financial institutions, such as banks and credit unions, issue secured personal loans that are paid back in monthly installments over a minimum of 90 days. Although this type of loan still requires a credit check, it is easier to obtain because repayment of the debt is backed by an asset equal in value to the loan amount. The fixed interest rate is typically lower since the lender has a guarantee that the loan obligation will be fulfilled either through repayment or repossession of the collateral.

Loans are tied to a variety of assets, including mortgages, vehicle titles, investment accounts or other valuable commodities. The Federal Trade Commission advises consumers to carefully consider the terms before borrowing money that uses a home as collateral.

2. Negotiate a Payment Plan with Creditors

When you need to settle up with another creditor, avoid late penalties or prevent credit score dings, temporarily free up cash flow by negotiating payment plans with creditors. Utility and cable companies often accept partial or delayed payments, but be realistic about how much you can afford and when you can make payments so that you are able to stick to the agreement. Installment loan creditors may also adjust due dates to coincide with paycheck dates, restructure payment terms or modify the total debt. Some lenders even offer annual programs that allow you to skip a payment.

3. Ask Your Employer for a Paycheck Advance

Some employers allow long-term employees in good standing to tap advances on their upcoming paychecks. Since the temporary loan is borrowed against future wages, the amount cannot be higher than you expect to earn. The money is simply deducted from the next payroll. Each employer sets its own rules within federal and state employment guidelines, so the terms of the advance should be outlined in writing. Make sure the agreement includes how often a loan can be accessed, assessed fees and interest charges and what happens if you lose your job before the loan is repaid. The biggest downside to this option is that it invites your employer into your private life.

4. Tap a Credit Union Payday Alternative Loan

Credit union members may have access to Payday Alternative Loans (PAL) up to $1,000 for a maximum of six months. Although similar to payday loans, regulations from the National Credit Union Administration (NCUA) stipulate that application fees cannot exceed $20 and annual percentage rates are capped at 28 percent.

5. Seek Help From an Emergency Assistance Program

Utility companies, community programs and nonprofit organizations, such as the Salvation Army and Low Income Home Energy Assistance Program (LIHEAP), provide financial assistance for utility bills, groceries, prescriptions, childcare, rent and car payments. These income-based assistance programs work with local residents who are facing a short-term financial crisis that can be alleviated with a one-time grant.

6. Overdraft Protection Cash Advance

Most people rely on overdraft protection as a safety net for covering charges that exceed the balance in their bank or credit union checking account. However, overdraft protection is technically a line of credit that can be tapped for a cash advance. Rules vary widely for transaction charges, and limits may be placed on how much can be taken at one time. The interest rate for cash advances is always higher than the regular rate, so it is pricier than a traditional installment loan.

Other options for immediately increasing your cash flow include adjusting your tax withholdings and scaling back services, such as cable packages and wireless data. Be wary of riskier alternatives, such as pawning valuable items that you cannot afford to buy back or handing over the title to your vehicle for an auto title loan. Avoid tapping into retirement accounts and life insurance policies unless there is a serious emergency that requires a larger loan amount. To learn more about how payday loans can help you overcome a current financial struggle, visit the

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