What Are The Alternatives to Payday Loans?

Getting a payday loan is not the right choice for everyone, if you are looking to gain access to cash quickly under a specific set of circumstances, such as in a financial emergency.

This is because if payday loans are not used correctly, they could lead the borrower to get into further financial difficulties, in part thanks to payday loans typically having high APRs, which can make it difficult for some people to pay back.

As a result, it is recommended that you use payday loans only as a last resort, and only if you fully understand the terms and conditions of the loan itself before taking one out. There are a variety of alternatives you can choose from aside from payday loans. Here are some options below that you can use instead.

Guarantor Loans

If you have a bad credit history and are finding it difficult to get access to a loan, then it may be worth looking at guarantor loans, instead of getting a payday loan.

To provide clarity, a guarantor loan is where a family friend or a member acts as your guarantor for the loan amount you are taking out. This means that should you end up defaulting on payments at a later date, your guarantor will pay this debt on your behalf.

Guarantor loans are commonly taken aback by those with bad credit scores, as many find it difficult to get approved for a loan without someone providing a guarantee that it will be paid back. In most cases, the guarantor will need to be a homeowner, or provide evidence that they have sufficient wealth or assets to cover loan repayments, should this arise.

Guarantor loans start from 12 month loans, up to 60 months loans in total, with the option to repay early at any point.

Credit Cards

Another alternative to applying for a payday loan is to use your credit card instead if you have one, and it has available credit on it. Whilst it is not recommended to use your credit card to fund regular expenses, due to the often high interest rates on credit cards, it can be useful if you need cash in an emergency. Furthermore, credit cards tend to have lower rates than using a payday loan, making it a less expensive option for you.

Credit Unions

You could also look at using a credit union rather than option for a payday loan. These credit unions are usually relatively small, non-profit organisations that are set up by a community, or a specific group of people in order to help provide financial support to its members, should they need it. They also tend to provide short-term, low value loans that typically have a far lower APR than you would receive with a payday loan provider.

You will find that the members of these credit unions usually share a common ground in some way shape or form, such as living in the same area, or perhaps working in the same profession (for example, the Army and the Navy have credit unions).

In order to apply for financial aid through a credit union, you will usually need to meet some kind of eligibility criteria first. With over 500 credit unions to choose from across the UK, there may be a good chance that one of them could suit you.

Logbook Loans

Another viable alternative to getting a payday loan is choosing a logbook loan instead. Unsure of what a logbook loan is? This refers to a lender allowing you to borrow money on the basis of using your vehicle as security, in the event that you end up defaulting on payments.

You can usually borrow money against the value of your car, in most cases up to 80% of the value of your car. This will then be used as a deposit, if you fail to make repayments on your loan.

You will still be able to use the car when you take out a loan, but you will not technically own it. Nevertheless, it is worth keeping in mind the potential risks: if you can’t keep up with repayments, then the lender has the right to repossess your vehicle.

Selling Things

It isn’t just other types of loans that can help you out of a tricky situation. For example, have you considered selling items that you already have to get some cash quickly? If you have gadgets that you do not currently use, you may be able to get money for them still, even if they are used.

You could also look at selling items you no longer want on eBay, Amazon, Shpock or Depop. Even with fees taken off for each item sold on the site, it is usually still worthwhile and the turn around can be just a few days. For same day cash, there is always the old fashioned car boot sale on a Sunday to help you earn some extra money from things you do not want or need.

Savings

Instead of applying for a payday loan, what about looking at dipping into your savings? Whilst it is not advised that you should use savings to live on, on a long-term basis, it could just help you to give an injection of cash you need in the short-term, such as to cover an unexpected bill, or a car breakdown.