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There are many critics of payday
loans that will tell you that these types of loans are not good options for
financial assistance, especially if you are going through a rough patch in
terms of money. Payday loans are more appropriately called payday cash
advances, as they are based on your next paycheck and you are expected to repay
this loan, as well as applied fees and interest, on the date of this check.
They can be expensive, and restrictive, though, and are recommended only for
emergency situations. Before taking out one of these loans you should consider
the alternatives.
Alternatives: Other Loans
There are many other loan products
available that may offer a better option for your financial needs than a payday
loan.
- Personal loans through your bank can cover expenses with a higher amount, lower interest and longer repayment period than payday loans. These tend to require a good relationship with your bank, as well as collateral and good credit standing in order to be eligible. Repaying these loans promptly keeps costs down and can further improve your credit score, making you eligible for larger loans later.
- Loans are also available through financial institutions created specifically for the purpose of offering loans. These are usually slightly more expensive than bank loans, but have lower credit requirements. You still need to meet certain income, expenditure and credit standards, however.
- If you have a life insurance policy that has a cash value component, you have the option of taking a loan out on the accrued cash value. This loan will remain interest-free as long as you repay it promptly.
Alternatives: Cash Advances
A cash advance is essentially
getting money early from an anticipated payment. A payday loan is similar to
this, but there are other types as well.
- Some employers give you the option of taking a cash advance on a future paycheck. This can be a good choice because there are no fees or interest associated with these advances. You do not need to repay this advance, it will simply be deducted from your next paycheck.
- Many credit cards allow loyal users to use some of their available credit balance in the form of a cash advance. There are generally fees and some interest, but they are lower than payday loans, and depending on your credit balance there may be more money available.
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