While a credit card advance may come in handy at most times, it also relatively expensive. Credit card companies charge high interest rates if you don’t pay back the money quickly. Did you know there are many other ways to borrow money?
Here are eight alternatives that you may want to take into consideration. Take note that each of these payday loan alternatives still depends on your assets and credit score. They also come with their own pros and cons:
Borrow From Family and Friends
Ask your closest family members or friends to loan you some cash. If you’re lucky, you can get an interest-free loan, but you should also ask whether they can grant you a low-interest and short-term loan. While this may be convenient, it can also be embarrassing. Borrowing from relatives is often an emotional experience. Ideally, we should never mix emotions with business arrangements.
To make the whole process feel less embarrassing, you should consider preparing a written agreement that lists all the terms for both parties. This way, you have everything written down in paper including the terms, the interest rates, and repayment.
For long-term loans, this is a great option with competitive interest rates. Approximately 87% of administrators let their participants borrow some cash. While the interest rates may vary, usually, the maximum amount that can be borrowed is 50% of maximum funds. However, there is a limit of $50k. The terms of repayment can be as long as five years.
The great thing about this type of borrowing is that there are no credit checks. Also, payments can be easily set up and can be deducted from the borrower’s paychecks.
Personal Bank Loan
A personal bank loan can have some of the lowest interest rates on the market. However, many banks require applicants to have a good credit score. They also need have a higher level of assurance that you will be able to pay the repayments. Put simply; a personal bank loan is great if you can get one.
Technically, these funds from these should be used for your retirement. However, they can also be used as emergency funds. You are allowed to withdraw funds from this type of individual retirement account without having to pay a penalty since contributions come from net pay (after-tax dollars).
If you are less than 59 years old, you don’t want to borrow more than your actual contributions, regardless of the interest that has accrued. These earnings (from interest) may be subject to penalties and taxes.
This option involves borrowing money from investors, hence the name – peer-to-peer loan. You need to have a good credit score for this one though. Their requirements are rigorous, but they have higher approval rates than many other lenders. You can borrow up to 30% of your APR with a 5% fee.
If you’re currently employed, you may ask your employers for a salary advance – most companies have these setup in place. They’re usually low-cost, with the repayment option to be deducted automatically from the borrower’s paycheck. While some of the fees are as low as $8, you have to be cautious about the amount you’re borrowing because of high-interest rates – usually ranging between 10 – 165%.
Collateral refers to an asset that you can put forward as security on a loan. If you default, i.e., don’t pay back the money you borrowed, the lender can seize that asset and sell it. A collateral loan is a good option if your credit score is low. Credit lines may vary depending on the asset’s total value.
Payday Loan & Title Loan
Among all the other options, a car title loan should be your last resort because it can be extremely expensive. Payday loans are great if you need instant cash. However, their interest rates can be more than 100%, 200%, and even 500%. If you have difficulty paying back the loan quickly, the amount you owe the lender will increase rapidly. Probably much faster than you had anticipated.
Next time you are about to borrow some money on your credit card, take a step back and consider the options listed above. You could save a lot of money.