Choose other alternatives to payday loans

[Sep 27, 2010.]

 

Think getting a fast loan from a payday lender is a good way to get by until your next paycheck? Think again. If you apply for a payday loan there is a risk that you'll be trapped in a cycle of high interest debt that will last much longer than the initial two-week period. If you're coming up short of cash for paying your bills, consider the following alternatives to cash advance loans.

• Ask creditors for help. Depending upon your history as a customer, some of your creditors may be willing to offer you a temporary suspension or reduction of payments. You're more likely to get a temporary forbearance if you have consistently made payments on time or been a long-time customer. Be ready to supply documentation of your financial hardship if necessary. Auto finance companies and student loan firms are among the creditors who may be willing to grant a forbearance. Utilities also may have programs to assist customers who are struggling financially.
• Low or zero interest balance transfer. Borrowing money should never be the first choice to pay your bills. However, if you choose to go this route you're better off using a zero or low-balance transfer offer than getting a payday loan. In many cases the introductory balance transfer offer is going to expire after a period of time, so you need to have a plan for paying back the money in addition to other debt you already have. Also, keep in mind that balance transfer offers usually charge a fee that could run you up to 5 percent of the balance.
• Get a fixed-rate personal loan. Depending upon your credit score you may be able to qualify for a personal loan at a reasonable interest rate. While fixed-rate personal loans are available, you may only qualify for an adjustable-rate loan. You can begin shopping for personal loan quotes here.
• Borrowing from family or friends. Be careful about borrowing loans from friends. Always draw up a contract with the amount of money borrowed and repayment terms to avoid any conflicts later. Don't borrow money if you don't intend to repay it or you may end up losing a friendship or creating a rift with a family member.

Make sure you've done everything possible to lower your expenses before turning to loans. While a personal loan can help you pay bills if handled properly, payday loans often come with high costs. Also, it doesn't make sense to borrow money if you know you won't be able to pay it back.

 

About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.