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Is There a Better Alternative to Payday Loans?

Is There a Better Alternative to Payday Loans?

by Krutika Lohakare

If you need to borrow money fast when you don’t have the best credit, you might think a payday loan cash advance is your only option — but it isn’t.

The payday loan is certainly the most popular cash advance. It’s what comes to mind when most people think of quick loans available with a bad credit score.

Besides being widely known, these quick loans are also convenient and easy to get, so they can seem like the right option if you’re facing an unexpected emergency expense without savings. 

But as you’ll find out today, there are downsides to this advance. Below, you’ll see how they can go wrong before exploring the alternatives to payday loans with bad credit. 

3 Reasons to Avoid Payday Cash Advances

A payday cash advance might be a solution to your next financial problem, but you should consider them from all sides before you give them a go. 

This is a golden rule of borrowing, even if you aren’t planning on taking out a payday cash advance. The lending experts at MoneyKey recommend learning about how rates and terms affect your cash advance to see how well you can handle their repayments.

Here are some things to bear in mind before you sign on the dotted line.  

1.They’re Small

According to the Consumer Financial Protection Bureau, the average payday loan is $500. This might work if you’re just shy of what you need for a repair or medical expense, but it may not be enough to pay off the entire bill. 

2.Short-Terms and High Fees Can Be a Challenging Duo

If you have bad credit, high fees are par for the course when it comes to borrowing. Most financial institutions will raise their rates to reflect your score. These high fees can be challenging to cover when paired with short terms.

The average payday cash advance is due all at once in two weeks. This option isn’t a good idea if you can’t manage to repay what you owe in one payment by then.

3.Most People Roll Over

Sometimes, your budget shows you can handle a payday cash advance, but then another unexpected expense comes along before your due date. With your money stretched thin, you can’t pay both, so you have to choose between this new expense and your advance.

Quick loans don’t always win in this showdown. One study shows four out of five borrowers have to renew their advance. They reborrow their loan at a cost to earn some time. 

3 Alternatives to Payday Loans with Bad Credit

If you’re willing to do a little online snooping, you’ll find other options when you have bad credit. Here are three of them below.

1. Installment Loans

As online loans with monthly payments, installment loans give you a longer term than you would get with a payday cash advance. These payments typically line up with your pay schedule, but you’ll have several weeks, months, or even years to pay off what you owe.  

They also give you more funds to work with, so you can use them for more substantial emergencies. 

2. Lines of Credit

A personal line of credit may also float you more money by working like the average credit card. You’ll have a credit limit that you can withdraw cash from as you need it — whether that’s all at once or in small increments. Once you pay back what you owe, you’ll also have your full limit available to use without having to reapply. 

Bottom Line

Payday cash advances are just one emergency option. You can find alternatives that might work better for your financial situation, even if you’re sporting bad credit. 

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