High Interest Loan Alternatives
Posted on Friday, May 13th, 2011 at 10:17 am in General Payday Loan Tips
As far as short-term lending goes, payday loans can sometimes have the highest interest rate depending on your lender. Annual percentage rates on instant payday loans can range anywhere from 200% to over 1,000% in states with minimal lending restrictions. If you need fast cash in a pinch and can pay back your loan right away, then the interest rate won’t affect you as much, but customers who need longer term cash should consider other alternatives to payday loans and cash advances.
Savings Accounts
It’s always a good idea to have a savings account for emergencies. If you’re not saving money yet, open an account right now and start putting a small percentage of your paycheck aside every week. If you already have cash saved, try using that in an emergency before you borrow cash from a bank or payday lender.
Personal Loans
Personal loans are essentially payday loans offered by a bank, but with considerably lower interest rates. What’s the difference? Payday loans are offered to customers with no credit check, which means people with bad credit can get a loan, creating higher risk for the lender. Payday lenders charge higher interest rates to balance out this lending risk. Banks, however, require credit checks for their personal loans. If your credit score is good enough, you can apply for a personal loan instead of taking out a payday loan. Some banks have lowered their credit score standards for personal loans to attract customers with less-than-perfect credit.
Credit Cards
If you have a decent credit score, you can probably get a good interst rate on a credit card to use for emergencies. This is only a good idea if you have good credit and can reserve your card for emergencies only, and not every day purchases that will leave you in debt.
Payday loans can be a good help in a sudden emergency, but due to their interest rates, you shouldn’t rely on them for long-term financial help. If you’re struggling financially, talk to a credit counselor in your area for help with debt, budgeting, and more to keep you healthy and on-track.
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