Find alternatives to a payday loan.
Cash advance payday loans are an expensive way for people to get money in an emergency, however there are alternatives to explore. Unfortunately too many people, in particular low-income families with limited options, turn to predatory lenders them as a last resort. The good news is that there are cheaper alternatives to a payday loan that are offered by banks, credit unions, non-profits and other lenders. Find some ways to borrow money other than a payday loan below.
The interest rate that consumers pay on a payday loan can go up to 300% or higher depending on the amount borrowed and applicant’s credit history. While some of these lenders that offer alternatives could still have interest rates that range from the high teens to a still very high ”10s” of %, they are still much better options for individuals who need immediate cash.
Each one of the other sources of alternative funding is listed below. While in general, borrowing money (especially at a higher interest rate) should always be used as a last resort, it still is always a good idea to look into all different types of short term loans and alternatives to cash advance loans. Borrowers should even consider other options, including side jobs, selling stuff online, websites and other programs that can provide people in need with emergency cash often within a matter of days or so.
Direct deposit and checking account advance loans from banks
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Many regional and national banks have come to the realization that consumers need some type of lower interest rate alternative to payday loans. To meet this demand they have their own lending products. While the interest rates charged by banks are still not cheap, the fact is that they are much lower than salary advance loans or other sources of borrowing from payday lenders.
US Bank Simple Loan is marketed as a short-term line of credit that is offered to consumers in which the customer can borrow money, in advance, from an upcoming direct deposit. It is small dollar, in $100 increments, and the lender allows the money to be paid back over multiple months at a rate much less than a payday loan. Details are here. https://www.usbank.com/loans-credit-lines/personal-loans-and-lines-of-credit/simple-loan.html.
- In addition, the lender will from time to time offer other alternatives to a predatory lender. They do also have programs such as the US Bank Checking Account Advance.
Fifth Third Bank MyAdvance, which is an Early Access short term loan. This is another payday loan alternative in which a customer can take an advance on a future direct deposit. The deposit will be automatically repaid after a predetermined amount of time, and it is only offered to customers who have historically been in good standing. Get more details on the MyAdvance Early Access Loan program.
Wells Fargo Flex Loans are a great alternative. This is a form of Direct Deposit Advance Service. Funds will be immediately deposited in your account to help pay for unexpected or emergency expenses and any bills that result from them. This nationwide, leading bank only offers this product to a limited amount of customers who bank in certain states. Get more information on the Wells Fargo Advance.
Truist Bank's as well as Regions Bank's both offer a version of a Small-Dollar Loan Program as an effective alternative to a predatory payday type loan. These regional lenders offer loans designed to provide affordable credit options and source of lower cost funds to customers, with specific terms and eligibility criteria available at the banks. Truist Bank can be reached at 1 (844) 487-8478 while Regions Bank is at 1 (800) 734-4667.
Bank of America's Balance Assist lends struggling families money (often a few hundred dollars) for a nominal fee. This program is available to BofA customers who have had a checking account for at least one year. The fee for the loan can be as low as $5 when compared to alternatives such as a payday loan at 10s of percent compound interest rate. More information is here. https://info.bankofamerica.com/en/consumer/community-banking/banking-solutions.
Get Paid Daily allows hourly employees to get their salary the same day, which helps reduce the need for a high priced predatory loan (payday, title, etc.) A number of companies now allow hourly workers to get their wages each and every day, or even instantly. It in effect means you do not need to wait a week or two for a regular paycheck. While there are fees to using the service, getting paid daily is a solid alternative to using a payday loan as the cost is much more. Learn about the cost of getting paid daily and how to do it.
There are several other payday loan alternatives and sources of short term cash. They involve everything from taking a temporary job contract, selling possessions, using technology to make a few extra dollars, and more. Each of them has pros and cons, but they can be explored. Find a list of free money programs that do not involve loans.
Alternatives to a payday loan but these also come with risk
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Car title loans can sometimes be a more “affordable” alternative, but they also come with risk. Some lenders will allow a family to borrow money using their automobile as collateral. This is a similar form of financing in that the client is given a certain amount of cash based on a future obligation. However in this case the family will not be repaying the loan with their next paycheck, but they are risking their car in order to borrow from the lender. There are also alternatives available in these cases as well. More information on car title loan assistance.
Some people with low-credit scores that turn to payday lenders and they also have some other options. These range from fin-tech companies to some non-profits or even peer to peer lenders. The goal is to try to improve access to credit and emergency funding while at the same time helping the borrower with a questionable credit history build a financial future. The interest rate is capped at a reasonable rate to help facilitate lending and borrowing for low income individuals. Learn more on the loans for people with a low income or bad credit and why these can be effective alternatives.
Employer-Based emergency loan programs will help employees of those companies get emergency money. In effect these are a form of salary advance loan, based on the employees paycheck, that advance cash for a crisis. Some have terms and conditions, and my be backed by the employees other benefits. However they can be an alternative to a payday, car title or some other form of high cost borrowing. Check with your HR or benefits team for information on Earned Wage Access (EWA) services like Earnin, ADP's Wisely, Brigit, and PayActive. Always be sure the ESA program is approved by your state’s consumer protection office and get a list here. https://www.usa.gov/state-consumer.
Credit unions offer alternatives to payday loans
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Salary advance loans are lower cost, but similar to a payday loan. Many credit unions are offering a low interest rate alternative to their members. They are usually packaged as a comprehensive program that offers both financial literacy, a savings account, and counseling. One an applicant applies, they can be given a low interest rate salary advance loan. Learn more on credit union salary advance loans.
PALS loans from federal and state government affiliated credit unisons are targeted more at people with low FICO scores. These are advance loans, based on salary, that have a very low-interest rate. In addition a credit union PALS loan can also be given to gig workers or those credit unions members that work off an hourly wage and get details on Credit Union Payday Alternative Loans and Savings program.
Stretch pay loans - This is a financing option from some credit unions. It is a very low interest rate alternative to payday loans, with rates capped at a very reasonable interest rate that will make the money easier to repay. Get additional details on stretch pay loans.
Small dollar, short term installment type loans are also used by many lenders now. They are providing families, in particular those with a low income or poor credit, a strong alternative to a payday loan. Many different types of banks, online companies, and even credit unions provide this form of financing. Read more on short term loans.
State regulations of payday lenders
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If after exploring the different alternatives to high priced predatory and payday loans, if you still have no other choice but to use those lenders, then be sure you know your rights. Each customer should have access to the information on the laws and regulations in place that are intended to protect borrowers. As many state governments regulate lenders, including putting limits on how much a consumer can borrow as well as the interest rate. In addition to exploring alternatives to them, read up on payday lending laws in your state.
Most states have also created government agencies that consumers can contact in order to file a complaint or receive information on their rights. It may be an attorney general, banking department, or some other consumer affairs division. They can also provide suggestions on alternatives for borrowers, help people to ensure they are treated fairly and that they are not subject to predatory or unfair payday lenders. Click here payday loan regulators by state.
Non-profit credit counseling alternate solutions to using a predatory lender
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Consolidation of payday loans is available by many non-profit credit counseling organizations. If you currently have outstanding payday loans and/or will be using one to get emergency cash, you should strongly consider consolidating any debt in advance. As the fact is that sometimes people do not qualify for any alternatives and have no other choice but to use a salary advance loan. So if you do need to use one, be sure to pay it off as soon as possible. Consolidation is a great way to do this. More on payday loan consolidation.
Many individuals who take out payday or salary advance loans to pay their bills probably have some type of more significant credit or financial issue and can benefit from a free counselor. There is often some other form of hardship that is ongoing. The borrower may have a poor credit rating, have a history of managing their money irresponsibly, or they may just be down on their luck and have no other options available to them.
- Regardless, it is usually a good idea to speak to a non-profit credit counselor for advice. They can go over the alternatives to using a payday loan, discuss their often free debt counseling services, and help borrowers with other financial obligations they have. They are also a source of information on loan programs from credit unions as well as mainstream lenders. The services are comprehensive, and are often provided at no cost to the client. Click here for a listing of national credit counseling agencies that can also help you address or eliminate payday loans.
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