When you find yourself in financial dire straits, a one-off payday loan can be a lifesaver, but these short-term loans come with a hefty price tag. With annualized interest rates well into the triple digits, payday loans are among the costliest of all financial products.
Even if you think that a payday loan is your only choice, it is always a good idea to look for better, and cheaper, alternatives. Here are some other things to try before you head down to the local payday loan store.
An Advance on Your Salary
Workers often use payday loans as de facto advances on their salaries. They use their payday loans to bridge the gap and give them money until payday, then rush back to the loan store to pay the money back when their paychecks finally arrive.
The problem with that strategy is its cost. When the payday loan comes due, the workers in question will be handing over extra cash to settle up, leaving them with even less to live on until the next paycheck arrives.
This can create a vicious cycle that is hard to break, so why not cut out the middleman and ask your boss directly? Not all employers will be open to the advance idea, but if you are a good worker and a valued member of the team, your company may be willing to extend a bit of credit.
A Digital Money Manager
If your bills arrive before your paycheck, changing the timing could also change the game. A number of new smartphone apps let workers get their direct deposits early, as much as two to three days before their non-app enabled colleagues.
Apps like Chime, EarnIn and FlexWage can give you access to your paycheck before the bills arrive, eliminating the need for a costly payday loan. If you have a smartphone (and who doesn’t?), you should give these apps a try.
Rearrange Your Due Dates
If your money is gone before the bills arrive, ask the issuers if they can change your settlement date. Many credit cards allow customers to choose their due date, making budgeting easier and reducing the need for costly payday loans.
For bills you cannot change, look for ways to budget your money more effectively. If you know your biggest monthly bill arrives at the end of the month, saving a few extra dollars from paychecks earlier in the month can give you the cushion you need, so you will not have to resort to an expensive payday loan.
Family and Friends
Borrowing from family members and friends can be tricky, but asking for a one-time loan can be a viable alternative to payday lending. Just be sure to pay the cash back promptly, both to maintain good relations and keep the “friend and family bank” open for later use.
If your electric bills overdue and the utility provider is threatening to turn the lights off, a payment plan could save the day – and your eyesight. Many utility companies, including phone companies, cable providers and electricity suppliers, are willing to set up payment plans for their past-due clients – you will never know until you ask.
Shutting off service is expensive, and most utility firms view it as a last resort. If you owe money on the basics, call the companies and ask about setting up a payment plan that can bring you current.
Payday loans get a bad rap sometimes, but they do have their value. If you are facing eviction or cannot buy food for your family, a one-time payday loan can give you the breathing room you need. Even so, it is important to look for smart alternatives, so you can keep more of your money and avoid the endless cycle of payday loans and repayment.