There are cheaper options than payday loans
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When you need cash quickly, it can be tempting to turn to payday loans. You know your paycheck is coming, so why not just dip into your future funds a little earlier, right? Wrong: Payday loans are not your only option when your budget is tight, and using a payday loan can wreak havoc on your financial goals.
The need for quick cash, however, is a real and common problem. A CNBC Make It survey found that 40% of 18-21 year olds surveyed strongly considered taking out a payday loan. More than 1 in 10 Gen-Zers surveyed considered a payday loan for tuition. As someone who would park a mile from my college campus to avoid school parking fees, I understand how difficult it is to manage college expenses. However, there are better options than taking out payday loans.
The Payday Loan Problem
In short, payday loans offer quick cash at exorbitant interest rates. Borrowing $ 500 to help you with emergency expenses until a paycheck arrives seems like a simple plan. Don’t be fooled. If this quick loan has an APR of 391% and a two week loan period, you now owe $ 575.
If you can’t afford to pay $ 575, you can convert your debt into a new loan. Interest charges keep piling up and it can become easy for anyone to get stuck in this vicious debt trap.
Do you really need to borrow money?
Before you borrow money, even borrowing money from a trusted family member, take a break and think about what this loan will do for your financial future. Do you really need to put your financial health on the line for this emergency? For example, if your car’s air conditioning needs repair, it is not a life-threatening emergency. No one wants to drive in a hot, stuffy car. But for the most part, that expense can be postponed for a few months while you put money aside to pay for the repair.
Before you borrow money, take a look at your spending to see what expenses you can cut back. Try to ditch streaming services and meal delivery services for a month or two and put those savings aside in a savings account. Take an inventory of your personal items and figure out what you can sell over the course of a weekend. Selling a beloved Xbox system isn’t comfortable, but it will keep your finances in the green, rather than taking out a loan.
Finally, ask if you can work overtime or do some odd jobs in your neighborhood for money. Again, it’s uncomfortable spending your weekend asking neighbors to mow their lawns for $ 20, but it will be better for your bank account in the long run. Consider borrowing money as your last option in a financial emergency.
Two Best Alternatives to Payday Loans
If you’ve considered all of your options and still need a loan for some quick cash, we’ve found two better alternatives to payday loans or debit your credit card. With all financial loans and applications, spend time researching terms and reading FAQs before deciding if a service or business is right for you.
Empower is a money management app that describes itself as “budgeting for people who hate budgeting”. It offers features such as:
Many Empower accounts also qualify for a cash advance of $ 250 with no fees, interest, and no credit checks. While this cash advance is free of charge, it costs $ 8 per month to own an Empower account after the free trial month.
Using Empower’s automatic savings feature can help you save $ 50-100 per month without you realizing it. The app saves money easily and painlessly. However, many other banking apps integrate this functionality at no cost. Alternatively, benefiting from Empower’s invoice negotiation and subscription management may cost less than what similar services like Trim charge.
Boro is a money app for students only. The app lets you set financial goals and track expenses so you don’t get derailed by a surprise expense. But life comes, this is where BoroCash can help.
BoroCash allows students and recent graduates to borrow up to $ 2,000 for 12 months. Your APR rate is determined based on your creditworthiness, but you can expect a lower rate than typical credit cards or payday loans. If you only need to borrow money for a month, you can also take advantage of the 0% APR option.
Unlike payday loans, the use of BoroCash allows students to build their credit. An app reviewer wrote, “The credit score goes up to 40 points after the second payment! Unbelievable. Thanks Boro! ” However, there is no guarantee that your credit score will increase significantly.
Even though BoroCash offers lower interest rates, borrowing $ 2,000 at 15.9% for 12 months means you’ll pay $ 182 per month for a total of $ 2,176 in repayments. Depending on your credit score, your interest rate may be higher, which would increase your monthly payments and total repayment costs. BoroCash shows customers exactly what they will pay before they agree, so you don’t have to worry about being sucked into hidden charges.
At the end of the line
When in doubt, don’t borrow. If you are unsure about borrowing money, take the time to consider your financial emergency and your financial options. It is important to build up an emergency fund to avoid feeling financially stranded in the future. Slickdeals is full of money saving tips and offers to help you save more and improve your bank account.
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Although we work hard on our research, we don’t always provide a complete list of all available offers from credit card companies and banks. And because offers may change, we cannot guarantee that our information will always be up to date, so we encourage you to check all terms and conditions of any financial product before applying.