A payday loan can be an excellent option for same-day cash in emergencies. However, it would be best if you first looked at alternatives to ensure it’s the right choice for your financial circumstances. Before approaching a payday lending company, you should consider other options to source the funding you require.
If you are considering taking out a payday loan, yet are unsure whether this is the right choice for you, then read our guide to find out more about alternative options to payday loans.
Borrowing from family or friends
Borrowing the funds that you need from family or friends may be the best-suited solution for your situation. If possible, someone close to you may be able to help you avoid interest fees and the high costs of a payday loan.
However, it would help if you still thought carefully about whether you will afford to repay them. Consider what might happen if you are unable to refund the money. When you borrow from family or a friend, you may risk damaging the relationship if you don’t return the money.
The Pros to Borrowing Money From Family or Friends
- Avoid interest charges and fees
- No credit checks
- No risk to your credit score
The Cons to Borrowing Money From Family or Friends
- You can damage relationships
- It can negatively affect your family or friends if you are unable to repay
- It may be uncomfortable to be in debt to people close to you
If you decide to borrow from family or a friend, you should create a budget to work out how much you can afford to repay and over what period. Review your income and living expenses to work out an affordable repayment schedule that suits both parties.
Payday Advances
If an emergency requires immediate cash, but you still have a while to wait until payday, you could try requesting a payday advance from your employer. Your employer may be willing to provide an advance on your wages, especially if you have been a reliable employee. This could be the perfect solution to unforeseen costs.
The Pros of Payday Advances
- Avoid interest charges and other fees
- No credit checks
- No risk to your credit score
The Cons to Payday Advances
- It may be awkward to discuss your finances with your boss
- You might not be able to get enough money to deal with the emergency
Credit Cards
Using a credit card is another option to keep up with financial obligations until your next payday. You may be able to avoid taking out a short-term loan by using a credit card to make necessary purchases.
However, you should be wary that they can be expensive and carry annual fees. It’s also important not to get too tempted to overspend with money that you don’t have. Remember, you will have to pay back everything you buy with a credit card! Try to repay your credit card debt as soon as possible to keep down fees.
Pros
- They are a convenient form of credit
- Cards can include reward points and perks
- They can be a great way to build a good credit score
- Lower APR
Cons
- They can be expensive and sometimes have annual fees
- Applying for too many credit cards can damage your credit rating
- It’s easy to dig yourself into a hole by overspending
An Authorized Overdraft
With many current accounts, you can access an authorized overdraft to help you when you’re in need of cash. Check with your bank to see what’s on offer. Some provide interest-free overdrafts, while others can be costly. In general, going into an authorized overdraft is cheaper than taking out a payday loan.
However, you should be careful to ensure that you don’t exceed the overdraft limit. This will put you in an unauthorized overdraft, which can be very expensive and create other financial struggles.
The Pros to Using an Authorized Overdraft
- Access interest-free or low-interest credit
- Can improve your credit rating if used sensibly
- Quick and convenient to arrange.
The Cons of Authorized Overdrafts
- Exceeding the limit can be costly!
- Going past the overdraft limit can negatively impact your credit score
- You can’t access as much through an overdraft as a loan
Overall Verdict: Is A Payday Loan Right for Me?
By now, you should hopefully have a better idea about the alternative options are to payday loans. Payday loans have their advantages, however you should always consider any alternative money borrowing options before having to deal with any potential risks to these. While you may be eligible and qualify for a payday loan, this does not necessarily mean that it is the best choice. It is best first to exhaust all other efforts to get the funds you need.
