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Payday loans seem to be an ideal option when you need money during an emergency. No loan other than payday loans has quick disbursal. Further, you can apply for these loans despite your poor credit rating. Everybody knows that these loans are bad. They can trap you into a predatory debt cycle. The interest rate for these loans can be up to or more than 292% and the APR can go up to at least 391%.
These loans seem to be very affordable as you can get rid of it within two weeks, but this is where you slip up. Failing to pay off the debt on time will invite interest penalties and late payment fees. Once you fall behind payments, the debt continues to soar. Well, is there any option other than payday loans? Of course, yes.
When you have an impaired credit standing, you cannot get a loan with a lower interest rate. Best deals are generally available for borrowers with good credit rating. Since poor credit borrowers have high default risk, the lenders charge high-interest rate. However, it does not mean that you cannot get a deal with a lower interest rate. Loans for bad credit with no guarantor are a more ideal option than payday loans.
The repayment term of the former varies from three months to 36 months depending on the size of the loan, which means you will pay off the debt in monthly instalments. The length of payday loans cannot be more than two weeks and therefore they are more difficult to manage. Bad credit loans charge lower interest rate as compared to payday loans and they are paid in instalments. These loans can keep you from falling behind repayments as you can manage your monthly budget accordingly.
Credit cards are the best option to fund your expenses when you have run out of money. Credit cards mainly aim at helping you financially when you face cash shortfalls. You will pay interest on your credit card bill like in case of other loans, but it is likely to be less than the APR of payday loans. There are likely to be some expenses you cannot charge on your credit card or you are not likely to get grace period to pay back the debt. In this case, interest will accrue every day, but it will still be less than the interest rate charged on payday loans.
Turning to friends and family is also an option especially when you have maxed out your credit card. If they are willing to help you, make sure that you will refund the money as quickly as you can. Otherwise, it will sabotage your relationship. The biggest advantage of seeking help from your acquaintances is you do not need to pay interest on top of what you owe, and if somebody charges interest, it is not going to be as high as payday loans.
Of course, no one will be ready to lend you money if you approach them directly. You should have a genuine reason for borrowing money and evidence so that they can trust you. Tell them why you need money and how you are going to pay back money to them. The chances of getting money are higher when you have a genuine reason for borrowing and a reliable repayment plan into the bargain.
Unsecured loans carry high-interest rates because there is always a high risk of default. The situation becomes worse when you have a bad credit rating, but collateral can help you get a loan at a lower interest rate. Personal loans usually do not come with the obligation of putting security, but you can go ahead with this option if you do not have any problem. The security will definitely be worth more than the cost of the loan so that the lender can liquidate it to recover cash if you permanently fail to pay off your debt. Collateral is a good way to get a low-interest rate deal, but make sure that you will not settle your debt on time.
Loans are not the only option to tide you over when you are in a tight spot. Though direct lenders in the UK such as British Lenders lend money to as many borrowers with bad credit as possible, chances are they turn down your application. Before you directly jump to a loan offer, you should seek interest-free options and one of them is withdrawing advance salary. Your employer will likely help you if your problem is genuine. It might be a bit awkward to ask your employer for help, but it is rational.
Payday loans are undoubtedly expensive. You should try to consider other alternatives such as bad credit loans, credit cards, advance salary, money from friends etc. These options will not fall you into a predatory debt cycle.
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