However, payday loans can be very helpful for short term use if you are in a financial rut and if you time is of the essence to improve your financial situation by means of some additional money.
Also, if you are starting a business and one of the only sources of funding available to you is a short term loan, these loans could be worthwhile. Key to avoiding having to take out these loans though is understanding why you may or may not need it at all.
What are My Options to Avoid Payday Loans?
If you want to avoid taking out a payday loan, there are different options to explore. Some of these options will help prevent you from needing a payday loan, whilst others can provide alternatives to short term loans for those in dire financial situations.
Create a budget to avoid financial crises – Unfortunately, we cannot foresee the future circumstances that will affect our finances. Creating a budget will allow you to set aside some cash for emergencies, so you will not have to consider taking a high interest loan.
Declutter your home by taking things to the pawn shop – Most of our homes are full of junk that we struggle to discard. But one man’s trash is another man’s treasure! Take your old stuff to a pawn shop to declutter and earn some cash simultaneously.
Discuss your finances with your boss – If your boss at work understands your financial circumstances, they may be willing to give you an advance on your pay cheque. Approach this situation tactfully though; your boss does not owe you this favour, and it is best not to reveal unnecessary personal details about the situation.
Maximise your rewards – It is best for your wallet not to visit coffee shops every day for example, but if you enjoy your visits you should consider a loyalty card if available. If you are good at paying your monthly credit card bill, consider getting a card with cashback or air mile bonuses for the money you spend. Utilise all of the financial deals available to you and you may be surprised at how much you actually save.
Check out your local credit union – Some credit unions may offer loans with lower interest rates than payday loans. However, these loans will probably take a bit longer to process than the average payday loan vendor and you may be referred to a bad credit loans provider.
Borrow money from friends or family – Your friends and family know you better than anyone, and they may be in the financial position to offer you a loan with zero interest or very low interest. Borrowing money from family and friends is often an ideal option.
What Other Loan Options Are There?
Payday loans are not the only for of short term finance available for you if you need money quickly and for an immediate or pressing need. There are a range of other products, similar to payday loans which may consider taking out, depending on your circumstances, credit score and specific financial needs. These may include:
- Instalment loans
- Logbook loans
- 3, 6, 9 month loans
- Guarantor loans
- Credit cards
- Second mortgages
It is important in the first instance to be absolutely sure that you do in fact need the loan in question and that if you take it out, you are able to meet the necessary repayments. If you fail to do so, you may find yourself falling into a spiral of debt.
How Can I Tell if I am Being Scammed?
Although most payday lenders are legitimate and lawful, there are scammers who try to trick desperate customers that they are the same as loan companies. How can you tell the difference between the two? A ‘company’ may be false if:
- They require up-front payments: Legitimate lenders do not ask for fees before you have received a loan. If a company wants a fee before you receive money, it is likely a scam
- If a vendor refuses to provide a receipt for your loan, it may be a scam: You are required to receive a receipt documenting your loan and payment plan
- A collection caller makes mistakes on the phone, like mispronouncing the vendor name or the details of your loan