When your financial situation is precarious, it may be tempting to borrow money until payday. Unfortunately, short-term loans are rarely the best solution and often come with high costs attached.
Instead of taking out a payday loan, consider taking out a personal installment loan. These loans offer larger amounts and longer repayment periods, plus they usually come with lower interest rates.
Payday loans
A payday loan is a short-term cash advance designed to tide you over until your next paycheck arrives. While they’re easy to acquire, their interest rates and associated fees may be high. Over time, however, the total cost of borrowing may accumulate.
The Consumer Financial Protection Bureau reports that if you can’t pay back a two-week payday loan on time, the fee amount could increase to almost 400%. Furthermore, they note that payday lenders often tempt people into rolling over their loans multiple times which adds even more fees.
Fortunately, there are safer alternatives to payday loans. Instead of taking out a loan for cash quickly, consider applying for a personal loan with better terms.
Personal loans differ from payday loans in that they don’t usually require a postdated check and don’t come with the same high fees. Furthermore, they can help build credit history. While these options may seem more challenging at first glance, they are an effective way to stay out of debt and prevent the high-cost cycle associated with payday loans.
Paycheck advance apps
If you’re short on cash, a paycheck advance app can provide temporary financing until payday. Many of these apps work by connecting to your bank account and using data to determine how much of an advance you qualify for.
These apps are typically provided through employer-sponsored financial wellness programs and allow employees to withdraw some of their earned wages before receiving the next paycheck, helping reduce stress and boost credit scores at the same time.
Some apps provide financial wellness programs to teach borrowers budgeting and saving techniques to improve their finances. Unfortunately, these may be more costly than other borrowing options and may not provide long-term solutions for struggling borrowers.
Earnin, Dave and Brigit allow you to borrow money from your next paycheck before it arrives – but these services can be expensive. They charge subscription or fast-funding fees as well as tips. Furthermore, these apps carry the risk of overdrafts on your checking account, so be sure to explore cheaper alternatives before using one of these apps.
Personal loans
Are you in need of temporary money until payday? A personal loan might be the ideal solution. These loans come in various forms and must be repaid with interest over several months.
These loans are a popular option for consumers who need to cover unexpected expenses or large, one-time purchases. They can be used for everything from paying off credit card debt to financing a home improvement project or even financing a wedding.
When applying for a personal loan, you’ll need to provide personal information and financial data. The lender will review your application and decide whether or not they approve it.
Personal loans are accessible to people of all credit backgrounds and offer a range of terms and rates. Your interest rate will depend on your credit score, income level and payment history; typically those with higher credit scores qualify for lower rates and larger loans.
Credit cards
Credit cards provide a convenient and secure way to borrow money until payday. Banks issue these cards, enabling you to make purchases up to an approved credit limit with your card.
Credit cards can be an effective tool for building credit and getting out of debt if used responsibly. However, it’s essential to remember that borrowing on a credit card is actually taking out a loan with associated interest charges that could add up quickly.
Some credit cards also provide the option of taking a cash advance, which can be helpful if you need extra funds for an unexpected expense or emergency. Unfortunately, these usually come with higher interest rates than purchases do and lack a grace period. Furthermore, they could damage your credit score over time by creating a high balance on your card.
