Alternatives to Storefront and Online Payday Loans
When it comes to understanding money, we think we know everything we need, right? You work and you get a paycheck. That money goes into your bank account. You have bills and you pay them. It should be that simple. I think we can all agree that it is rarely ever that simple. How often did you not have enough money coming in to your bank account to match the amount of money going out? How many times did you want to make a large purchase, like a house, or car, that you did not have enough money to pay? Even more challenging is when you have an emergency expense when you need money right away.
At those times, you may not know what to do. You may not know where to turn. You may make some bad financial decisions as a result. Do not feel like cash loans for poor credit is your only option. There are payday loan alternatives. Keep reading to find out all you need to know.
What Do I Really Need To Know About Loans?
The first thing you should know is just because you can, does not mean you should. You should not jump into applying for a personal loan. You must make sure that a loan is the right option for you. There are many different types of lenders available to you. Have no fear, we will break them down for you soon. With all that access to so many different loans, it is easy to get overwhelmed. Even worse, it is easy to get scooped up in the hype and potentially a loan that is not right for you.
There are some basics that no matter the type of lender you use, they remain the same. There are two major types of loans, secured and unsecured. Most personal loans are unsecured, meaning they do not have collateral attached to them. They are a little riskier for the lender because if you do not pay back the loan, they could lose their money. A secured loan has collateral associated with it. Collateral is some type of asset, such as a vehicle, house, or even jewelry. You offer the collateral and if you do not pay the loan, the lender takes ownership of your asset. All loans have some type of fee, interest, or rate associated with it.
What Is A Storefront Loan?
If you prefer to talk to someone face to face and have them fill out the paperwork for you, then storefront loans are your thing. Storefront loans are what you think of when you think of traditional loan. They are the typical banks in brick and mortar buildings. No matter how advanced banks have become, some things with them never change. You know the deal when you walk into a bank. You have to talk to someone at a desk. You cannot handle a loan application at a teller. You have to wait in line to talk to someone. You never know how long that wait will be.
All just to talk to someone face to face and fill out a loan application. You are at the mercy of the banks hours. Even with all these downsides, a storefront loan is one of your payday loan alternatives. If you have good credit, a storefront loan is probably best for you. It will give you the lowest interest rate with the best terms. This process does take a little longer than an online loan. It does not take a long as it used to. The process has improved drastically over the years. For a perfect loan candidate looking for payday loan alternatives, a storefront loan is the best option.
What Is An Online Loan?
We live in a world of technology where we can do just about anything on our phones. Many of us do not want to talk to people, and certainly not face to face. An online loan is perfect for those type of people. An online loan is exactly what is sounds like, a loan online. You fill out the application and submit any needed documents online. These are also excellent payday loan alternatives.
Historically, online loans have been thought of as bad credit loans. While they do cater to those who do not have the best credit, they are not the only customers. Some of the benefits of an online loan is speed. You get your decision in about 24 hours. Once you are approved, the money is in your bank account 24 hours after that. That is super fast and one of the reasons why online loans are preferred.
Some things to be aware, online loans tend to have a higher interest rate. That is not a hard and fast rule, but more often, they will have a slightly higher interest rate. Your credit still matters. The interest rate is mostly dependent on your credit score. Another thing to pay attention when considering an online loan is credibility. There are many scammers lurking in the shadows just waiting for someone to hack. Make sure any online lender you use is a real lender. Lenders must be certified to lend money in your state, so that is the first thing you should verify. Make sure you can find out information about any lender you consider.
What Is A Payday Loan?
Consumer Financial Protection Bureau refers to a payday loan as a high cost, short term loan of around $500 or less. You typically have to pay back the loan on your next payday. This loan is based on your paycheck. You cannot borrow more than you will earn with your next paycheck. For those of you that are not looking for payday loan alternatives, I would caution you when considering a payday loan. If you do not pay back these loans timely, you receive large penalties.
In general, there is a fee when you borrow the money. If you pay back the money timely, you owe the money you borrowed plus the fee. If you do not pay back the money on time, you owe the amount you borrow, the fee and high interest on top of it. The interest can make it impossible to repay. Most often, you would have to take out a loan just to repay the original loan.
If you know you are going to be able to pay back this loan on time, and you have no other options, this may be a good route for you. If you do not think you can pay back this loan, do not do it. You will put yourself in a terrible position by doing so. If you really want to get a payday loan, you need to do payday loan shopping to make sure you are getting the best deal.
One thing to note – depending on the state in which you live, payday loans may only be available by law via a storefront lender or online.
Are Payday Loans A Good Idea?
You have decided that you do not want any payday loan alternatives. You still are not sure if a payday loan is a good idea for you. There has been a lot of bad information about payday loans. Some of it is valid, but not all of it. There is a right way to use a payday loan. For sure, payday loans are set up to make a lot of money off the people that do not pay back their loans. Pew Trusts outlines who is borrowing payday loans and why to help dispel the myths.
So, let’s talk about how payday loans can be a good idea. Sometimes you just find yourself in a bind and you need money fast to cover you until payday. You never know when an emergency might strike, such as sickness, emergency car repair, or an appliance breaks and needs to be replaced. The key to a payday loan is being able to pay it back. Payday lenders are not forgiving if you do not pay them back timely. They will get their money after they have added a huge penalty to what you owe.
However, if you know you are not going to be able to pay back the money and you talk to the lender, they may be willing to work with you. Of course, this comes at a cost. The lender may agree to letting you pay back the loan in two weeks, for an additional fee. Now, you owe the money you borrowed, plus the original fee, plus the fee for pushing the loan out by two weeks.
When Should I Avoid A Payday Loan?
We talked about when a payday loan can be a good idea. Now, we will touch on when it is a bad idea. If you cannot afford to pay back the payday loan, it is a bad idea. The first thing you should consider is in two weeks, are you able to take the loan amount from your pay check and pay back the loan. Typically, if you need money to get you from one payday to the next, you are going to have a hard time paying it back. Taking out a payday loan that you cannot pay back sets you into a spiral that you may not be able to stop.
One thing about payday lenders is they are here to make money. If they tell you differently, they are lying to you. Their goal is to make money. Their goal is not to help you pay back your loans. If you do not pay back the loan, they will hit you with interest charges.
There are some payday loan alternatives that you should consider. You have other options. You just need to look for them. Typically, when looking for a loan, you have to search for the right one for you. It takes some research and a little work on your part. You will benefit in the long run when you have a loan that you can afford to pay back. You would be better off taking an advance from your credit card. You could also contact your creditors to see if you can make arrangements about pushing back your payment dates. Often, if you are honest with your creditors, they are willing to work with you.
Your credit is a big deal. However, people do not always understand it. I am going to break down for you right here. Your credit score is a three digit number that tells lenders how risky it is to give you money. That number is built over time as you borrow money, pay it back and pay other bills. That credit rating is based on your history of payments and if they are late or missed. It also summarizes the money you have borrowed and from whom. Lenders are not the only ones looking at your credit report.
Insurance companies, leasing agents (for an apartment), and potential employers can pull your credit report. A bad credit score can stand in your way of a job, an apartment, and insurance. You should protect your credit score. It takes a long time to build it up, but only a couple of late payments for it to go down.
Let’s talk about the actual number for a bit. It is a three digit number that can range from 350 to 850. 850 is a perfect credit score, but anything above 800 is considered excellent. When you get into the range of 670 to 800, that is considered good. Typically, you find most people with a credit score between 600 to 750. A credit score falling between 580 to 669, is considered ok, or fair. Anything that is 570 or below is considered poor, or bad. When you have a bad credit score, loans are more difficult to get. Although, it is not impossible. You should consider payday loan alternatives with a bad credit score.
Some Things You May Not Realize About Your Credit
I think it is important to share a little more information with you about your credit. You should have a good understanding of these things before looking for payday loan alternatives. Your credit score is found on your credit report, but they are not the same things. It is the three digit number mentioned above. Your credit report shows your entire credit history, line by line. It shows any time you have applied for credit and your current accounts. It also shows some other public information. It also shows your credit age and how long you have been borrowing money. It shows how you use your credit. It is a fairly comprehensive list of all the things you have done.
There are three credit reporting agencies: TransUnion, Equifax, and Experian. By law, you are allowed to get a free copy of you credit report from each company every year. Often times, you can get your credit score from your credit card companies for free. More recently, they have been displaying them on their mobile apps. They even alert you when the number has changed. You getting a copy of your credit report does not impact the score. When a lender does a hard pull of your credit report it does impact it.
Looking at your credit report can help you detect any errors, or possible fraud on your report. Having a joint account with someone also impacts your credit score. You do not have a joint score with that person. You have yours and that person has his or hers. However, anything negative, or positive, that person does with that account impacts you. You should always protect your credit score.
What Should I Do If I Have Bad Credit?
Now that you have a little bit better understanding or credit scores, you may be worried about your own. So what do you do? The first thing you need to do is pull your credit report and take a long look at it. Check for any errors or problems and get them fixed right away. If you can prove they are errors, you can have them taken off your credit report. This can help improve your score. Keep in mind that negative marks on your credit do not stay there forever. Typically, after about seven years, negative information is no longer pertinent to your credit report. Bankruptcy is the exception to this. That is a different situation all together.
If you know you have bad credit, you should begin working to improve it. First thing, make sure from here on out, you do not miss any payments. You also must make all of your payments on time. You should begin to pay down some of your debt. Before you consider payday loan alternatives, pay off the debt you have. It takes hard and consistent work to improve your credit score. It is possible and worth it, but it does take time and thought. If you are in a situation where you just do not have any money to pay your bills, you might want to consider other means of income. You might want to consider getting a second job and all of that money goes directly to your bills.
Make some quick money
Look around your house and see if you have items that you can sell to make some quick money. Take a look at your current spending and see where you can make some cuts. You may be spending money on a gym that you do not use, or magazines that you do not read. Cancel those memberships immediately.
What Options Do I Have With Bad Credit?
You know you have bad credit. You have pulled your credit report and seen the number. You have done all you can to cut excess spending out of your budget. You have tried to pay down as much debt as possible, but you still feel stuck. You feel like you are drowning and bills are coming in faster than you can pay them. Now, there is some emergency and you need cash fast. What do you do? There are some options available to you. Some are payday loan alternatives. I want to explain your potential lending options that have not been mentioned. When you consider these options, do so carefully. If you are already drowning in debt, taking on more is a dangerous situation. If you feel you do not have any other options, take a look at these.
Title loans are loans that you get using the title of your vehicle as collateral. There is no credit check, so it does not impact your credit score. You give the lender your title and they give you money. They let you borrow a percentage of the value of the vehicle. The catch here is, if you do not pay them back, they own your car. They have your title and they sell your car to get their money. The interest is incredibly high. You could end up paying close to 50 percent in interest. Be sure you can pay back this loan. You should use extra caution when going this route.
Short term loans
Short term loans are another consideration. Use this with caution, also. This gets you cash fast, but is intended to be short term. That means you have a short window in which to pay it back. The interest on these loans is incredibly high. You should make sure that you understand all the terms before agreeing to this type of loan.
Are There Other Ways I Can Pay My Bills?
There are some other payday loan alternatives that you may not have considered. There are some ways you might qualify for free assistance to help pay your bills. There are rental assistance programs available to help you pay your rent. These programs may only provide you enough money to pay one month of rent. That could be enough to give you some wiggle room. Even better, every state has one, so no matter where you live, you can apply. These are government funded programs, so you can feel confident that they are legitimate programs.
There are also programs that can help you pay utilities. These are also run by the state in which you live. Another consideration might be to move and get into Section 8 housing. This is government subsidized housing. It is rent controlled based on your income. If you are really in a bad place, you may want to consider some of these programs. They may be good payday loan alternatives.
What Are Grants and Can They Help Me?
A true grant comes from the government or state in which you live. They are rarely awarded so that you can pay off your debt. They are often awarded so you can go to school, or perform research. However, there are grants awarded to states or agencies, and sometimes businesses, that are used to help people in need. The best thing that you can do is take a little bit of time and do some research about the options that are available to you. I know in these times it is easy to feel overwhelmed, stuck, and lost. If you take some time and do some research, you may find there is help available. Some of this type of help is good payday loan alternatives.
With all the information here, you are still left thinking that a loan is the best thing for you. You know there are payday loan alternatives. You know there is the potential for free money to help pay rent and utilities, but it may not be enough. You are still considering a loan, possibly a payday loan, or payday loan alternatives. Before you take another step, consider this:
- Can you afford to pay back a loan?
- Have you taken a look at your credit report?
- Have you sat down and looked at your budget to determine what you can truly afford?
If not, please do so before proceeding with a loan.
You must be sure that you can pay back any loan you borrow. It does not matter if it is a traditional personal loan, an online loan, a payday loan, or a title loan. It is dangerous to borrow money that you know you cannot pay back. This negatively impacts your credit and puts you in a worse situation. If you think you are drowning now, borrowing more money is only going to make that worse.
Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.
Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.