No matter how well we budget or save cash for emergencies, a financial crisis is inevitable. Whether it’s a car breakdown, accident, or a sick family member, you may find yourself in a tight spot financially once in a while. Getting money when you need it desperately is not easy.
Payday loans are easy to get since they don’t require credit scores, guarantors, etc. But we all know payday loans are bad news courtesy of the high-interest rates that can go up to 400%. Consider the following payday loan alternatives when faced with a financial crisis:
Ask for help from family and friends
Do you have trustworthy friends, coworkers, or family members who can lend you some money? It is good to borrow money from acquaintances because the loan does not accrue interest. Moreover, you don’t need to fill boring paperwork or verify your creditworthiness.
The lender and the borrower should sign a loan agreement with repayment terms and the deadline. It is hard to default such alone because in doing so, you will jeopardize your relationship.
Create a lending circle
Whether with your coworkers, neighbors, or special community groups, creating a lending circle is a good way of supplementing your paycheck or coming through during an emergency. Every circle member agrees to contribute a certain amount every week, month, or so, and the money is put together.
In case of financial emergencies, the borrower requests the pool of funds to be rendered to them. They can then fulfill their need and return the money later with a small interest.
Take a loan from a credit union
Several non-profit credit unions offer personal loans at low interest. These unions can be profession-affiliated such as a credit union for teachers or medical professionals. If your line of work has such a union, you will most likely qualify for a loan.
However, this option may take few days to process and remit the cash into your account. Additionally, credit unions consider where you stand in your company or place of work before deciding on your eligibility. All in all, credit unions are lenient with their requirements compared to banks.
Borrow pawnshop loans
If you are faced with an emergency and have no other avenues to borrow money from, it might help to exchange a priced possession for a loan from the local pawnshop. This possession might be an antique you no longer need or some expensive gift you received ages ago.
You may get the item back upon repaying the loan. You can also sell the item to the pawnshop owner, but they pay meager pays for expensive stuff. Do the math and choose the most appropriate option.
Negotiate a payment plan
Whether it is a hospital bill or an auto shop debt, you can avoid taking personal loans and instead create a flexible payment plan with involved parties. For instance, you may talk to your auto mechanic to take a third of the total amount as a deposit and wait for the rest until your payday.
This technique might cost you extra charges or interests, but the end game is to avoid payday loans. The vital part is to ensure the extra fees are lower than what you could have paid for a payday loan.
Boost your income
If you find yourself taking payday loans to pay your monthly bills because you cannot wait until the next paycheck, it’s time to think of other ways to make more money. These ways include taking an extra shift, a part-time job, or creating yard sales for items you no longer need.
The extra work may be challenging at times, but it’s your ticket to financial freedom.
Consider charities and community centers
Instead of taking a payday loan to pay for basic needs such as food, clothing, and shelter, look for local community centers, church organizations, and charities that offer freebies. Some local centers may be offering free shelter, food, and clothing, to sustain you until you get your finances right.
This option is not suitable for emergency cases because the charities need to do a background check before assisting you.
The best way to steer clear of the payday loan debt cycle is to avoid it at all costs. But with financial emergencies, you may be tempted to go for them due to their ease of application. Avoid the trap by trying other alternatives such as low-interest credit union loans, borrowing from friends, pawnshops, and creating a lending circle with people you trust.
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