When you examine the numbers, it’s difficult to deny that payday loans are detrimental to your finances. Yet people use them – despite the fact that there are payday loan alternatives out there. The trouble is, payday loans affect real people with real families who are unable to make ends meet. So, out of desperation, they often turn to what is probably the most customer-unfriendly financial product on the market.
The problem is the interest rate; upwards of 500%. A Pew Charitable Trust report revealed that the average borrower takes out eight loans each year with an average size of $375 and pays $520 in interest.
While it’s true that facilities are often positioned in lower income areas in order to attract those who need short term financial help, more of the middle class is turning to payday loans. Even well-known banks like Wells Fargo offer payday loans with an interest rate of well over 100%.
Those in a financial emergency can’t afford these loans. It’s done out of necessity — a desperate solution to a desperate problem but the Pew Research also found another interesting fact:
If faced with a cash shortfall and payday loans were unavailable, 81% of borrowers say they would cut back on expenses. Many also would delay paying some bills, rely on friends and family, or sell personal possessions.
This indicates that even those who feel desperate know that there are other options. Let’s look at a few of the more practical alternatives to payday loans.
Call Your Creditor
If you’re unable to make a payment, call the creditor and ask for an extension. Providing it’s not a regularly occurring problem, they’re likely to give you an extension without charging late fees.
Sell What You Don’t Use
List sellable items that you rarely or never use on eBay or Craigslist. Even if you do use those items semi-regularly, when you get back on your feet, you could probably replace some of the items using the money you didn’t pay in interest and fees.
Make a Business out of Your Hobby
You probably have a hobby or interest that could be a small business. Do you like to sew or make jewelry? Do you enjoy home improvement or repairing cars? These are all marketable hobbies. Who knows? Maybe what starts as a way to earn extra income will turn into a full time business.
Ask for Overtime
Make it known to your boss that when you can have more hours, you’ll gladly work. Showing enthusiasm might even get you a raise or a promotion.
Ask Your Bank or Credit Union
If you have good credit, don’t overdraw your checking account, and can prove yourself financially responsible, your bank or credit union may give you a short-term line of credit. The interest rate will be higher than auto or home loans, but it will be lower than payday loan rates. Just make sure you read all terms before accepting the loan.
Try a Pawn Shop
Thanks to the History Channels hit series, Pawn Stars, the shady, back-alley reputation that the pawn business took on has improved. Like any industry, there are ethical and unethical businesses, so do your research.
Pawn shops offer short-term loans in exchange for putting up an item of value as collateral. Interest rates are regulated by each state and although they’re still higher than a traditional bank loan, it’s a much better rate than a payday loan.
Cut Expenses
Cutting expenses now wont help you pay the bills you already have — but everybody has unnecessary expenses in their budget.
Could you get a cheaper cellphone plan? Could you reduce your cable bill — or cut it out completely? How about eating at home rather than at restaurants? Spending some time without luxuries in order to dig out of financial hardship will give you peace of mind.
Seek Help
Some financial emergencies are a result of circumstances beyond your control. If that’s the case, seek out a credit counselor, talk to the creditor, or talk to state authorities about public assistance.
In most cases, there are much better alternatives to payday loans — but if you have no other choice, it’s important that you pay the loan back as quickly as possible to minimize fees and interest.
Photo Credit: Jesse Wagstaff
The post 8 Payday Loan Alternatives That Loan Sharks Don’t Want You to Know appeared first on Len Penzo dot Com.
Source
Author : Gerrid Smith