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I have a lot of bones to pick in regards to personal finance. I’ve already called out rent-to-own centers along with shallow financial blogs. But today I’m only going to scratch the surface of public enemy #1–Payday loans. First thing’s first, STOP USING THEM. I’m going to walk-through the top alternatives for payday loans.
Some of these recommendations are primarily ways to get money fast. When time is of the essence and you need cash ASAP, working extra hours or applying for jobs isn’t effective in getting you money right away. However, those are good ideas to make more money to prevent yourself from getting caught in the payday loan trap.
NOTE: I’m going to go in order of the best alternatives and work my way down to the least efficient alternatives. If you want a brief synopsis of WHY I have a vendetta against them, check the end of the article. Alternatively, it’s best to understand why/how you got in your position? Is this a first time thing? Or round 20? Payday loans certainly don’t help you in getting out of a hole, but that doesn’t necessarily mean they are the cause of your financial situation.
Alternative #1: Ask Family
If you really do need cash ASAP, you should consider asking close family members for cash instead of going to a payday loan. Not only are they your closest bonds, but they are the most likely to help you out.
Of course, this alternative is used for one-off occasions in regards to smaller amounts (less than $1,000). You only get one or two chances before you start putting a real strain on your relationship with your loved ones. The general consensus (and I agree) that if you lend money to a family member, you won’t see it ever again.
Again, if you always seem to be in a pinch and have been relying on payday loans, you should take some time to evaluate your financial situation. The same thing can be said about borrowing money from your family. Do your best to pay them because they won’t charge interest and generally want the best for you.
Don’t lean on this or any other method. Often needing fast cash should be in case of an emergency, and nothing more.
As for the lending family member, don’t expect the money back and chalk it up as a gift. If you do get it back, then that’s bonus money.
Alternative #2: Ask Close Friends
This is very similar to #1. The reason why I separated this one was that while you can’t change family, but friends, on the other hand, are a different story. For friends, you are going beyond the terms of social bonds and are making more of a business transaction.
I am only speaking in terms of getting the finances you need. However, the reality is that your friends won’t likely treat the loan as a gift (and nor should they). If this is a one-time thing, you should have no problem paying them back.
Take the pros and cons of asking your close friends for money. There is more at stake that goes beyond money.
If you aren’t as comfortable asking for money for friends or family, then the other alternatives work as well.
Alternative #3: Set Up A GoFundMe Page
Gofundme is a crowdsourcing website that allows people from across the globe to donate money to good causes. It doesn’t cost anything to create a page, but you will need to enter your personal information.
I believe most of us that end up in bad financial situations have made mistakes and are doing the best to fix them. Sometimes emergencies happen and you only have a limited amount of time. This is a great alternative to payday loans and probably the best option next to asking friends/family.
You aren’t guaranteed to raise the money needed, you need to be compelling with your story and be genuine.
GoFundMe does take some money in exchange for the crowdfund, so if you need $500, you might want to request $550 (some as a buffer, the other to cover fees). Oh, and make sure you have a bank account so you can transfer the funds there.
Alternative #4: Get Personal Loan At A Credit Union
Unless you have good credit, don’t bother going to a bank. I recommend going to a Credit Union as they are often more flexible in working with you. If you get a personal loan out, your interest could vary between 5-20%. While 20% does seem high, this is a better alternative than paying 200-400% for a payday loan.
And no, I’m not exaggerating.
If you are unable to get approved with a small personal loan, there are other alternatives.
Alternative #5: Use A Credit Card Cash Advance
First off, I will say that if you can pay with a credit card over cash, this is probably my top choice, assuming you can pay off your credit card statement swiftly.
But if we are talking about needing cold hard cash, I will say that using a cash advance is probably the easiest and less damning option over a payday loan.
Depending on the credit card, you will be subject to a $10 or 5% fee plus APR around 25%. Again, that sounds pretty high. And honestly, it kind of is. But I’ll drop some quick math your way.
$500 CC Cash Advance paid off in 2 weeks (assume you just needed cash before a paycheck)
- $25 in fees + ~$21 in interest paid = $46 extra
$500 Payday loan with payback in 2 weeks
- Loan Fees $25 per $100 borrowed
- $500 = $125 in extra fees
- 14 Days that equates to APR of 651.79%
- Note: This is one example taken from a payday loan site (I won’t link to it because screw them)
In other words: You save $80 right out of the gate with credit cards. Again, not super ideal, but a damn good alternative.
Alternative #6: Reddit Is Always Worth Trying
Shoutout to Reddit by having a subreddit that allows you to borrow money. Similar to GoFundMe, you will need to create a profile and follow the rules when it comes to borrowing money. The terms are flexible depending on what you are asking for.
The average interest rate varies between 15% to 40% based on the amount requested. This might be good if you need a couple hundred dollars (often the case for payday).
Although personally, cash advances are the lesser of ‘two evils’ for smaller amounts of $300 or less.
Alternative #7: Donate Blood Plasma
You can go to many plasma donation centers twice a week to donate your blood plasma.
It’s for a great cause and on average they pay out about $40-$50 per donation. Again, this might come in super handy if you are in a tight spot.
I wasn’t going to include initially, but this is good way to get cash fast. In addition, if you decide to do it twice every week, you get a cool $400 extra. That will come a long way in preventing the need to go to a payday loan
Alternative #8: Use A “Fast” Personal Loan Service
There are some websites out there that promise to get you a personal loan as fast as tomorrow. The reason why I am including this is that these “fast” types of personal loans generally have higher APRs than credit cards.
Depending on your credit and the amount you request, it can vary between 25-100% APR (possibly higher).
This is probably the last resort I would lean on. Realistically speaking, I’m only counting this as a “better alternative” compared to payday loans. This is not something I would recommend.
Just imagine me sighing and saying, “well, I guess this is your last option”.
Realistically speaking, if you have decent credit, you should be able to get a personal loan. But if you go this route, your APR is still a bit better than a payday loan.
Payday Loans Are Terrible
I didn’t want to get too off-topic in this article. But I wanted to point while I am pretty harsh on payday loans, it doesn’t mean that any person in financial dire is terrible by any means. I wish I would be able to help out many others who aren’t aware of the alternatives.
My family was very familiar with payday loans growing up and the constant stress of barely living paycheck to paycheck was awful. They are almost criminal that they even exist.
If you do have a payday loan, do your best to pay it off ASAP. Once that is paid off, try one of the other alternatives. I would even go so far as to say use one of these alternatives to paying off your payday loans.
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