As COVID restrictions wear off, there are quite a number of people who itch to do a whole range of things that they have been denied to do for over a year. Unfortunately, tight budgets are not uncommon even with the new stimulus.
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Payday loans are tempting – quick cash with no credit check or digging through tax returns like a personal loan. It sounds too good to be true.
That’s because it is. Approximately 12 million Americans take out these readily available unsecured personal loans each year, many of whom struggle with monthly bills and personal expenses, according to Forbes. Many are not aware of the danger of insanely high three-digit interest rates.
“Unlike other loans, payday loans must be repaid in full on the borrower’s next payday at an annual interest rate of around 400 percent,” wrote TakePart’s Melissa Rayworth. Rayworth also found that up to 97% of people will borrow again from a payday loan.
Payday loan borrowers are prone to a downward spiral of debt that can last months or even years, ruined credit ratings, and predatory, aggressive collection practices from debtors seeking immediate repayment. “When you take out a payday loan, you will be the financial loser almost every time,” wrote Trent Hamm of The Simple Dollar. “They almost always cause more problems than they solve.”
The good news is, there are better ways to make money quickly.
Avoid payday loans with these quick cash alternatives
1. Take out an alternative payday loan.
Yes, there really are. For example, Iowa-based Veridian Credit Union offers a PAL with a maximum loan amount of $ 1,000 and a six month repayment period at an interest rate of around 20, usually regardless of a borrower’s creditworthiness. While it is not the lowest interest rate, it is more manageable than the high interest rates and short repayment periods of a payday loan. Remember Veridian is a credit union serving residents of certain counties in. serves Iowa and Nebraska and a few other select groups. If you’re not a member, ask a local community bank or credit union if they have a similar product.
2. Get a cash advance on your credit card.
Another similar but cheaper option is to contact your credit card provider for a modest cash advance. Again, the interest rates may not be the lowest, but this time you are borrowing against your own credit limit rather than a third-party provider. If the cash advance option seems too insurmountable for you, Just use your credit card for your post-COVID celebration and avoid using it again until you’ve paid your balance.
3. Stand out from your emergency fund.
If the additional interest in using your credit card is too great, you can always try to withdraw just enough cash from your emergency fund to cover your Christmas shopping expenses. Since you are acting as your own lender here, paying back that loan is entirely up to you – but financial discipline is important. Let too much time go by and you may never get around to replenishing what you borrowed. And that means you may not have enough money if a real emergency arises.
4. Ask your employer for an advance.
Your job may allow you to take a cash advance on your next paycheck. It’s not a loan, so you don’t have to worry about interest or repayments as it is money that you made. Remember, however, that if you ask for $ 200, you should be prepared for your next paycheck to reflect that difference. It is also wise not to get into the habit of asking for cash advances. Taking frequent financial shortcuts could leave a bad impression on your employer. Instead, request overtime – the extra hours can earn you extra money.
5. Sell, mortgage, or auction unwanted items.
Now is a better time than ever to start selling some of those old things that are taking up space in your home. It can be anything from a used cell phone to furniture, vintage clothing, home appliances, and more, a rich source of quick buck. Go the online route, such as eBay, Amazon Marketplace, or Craigslist, or Check out apps like OfferUp and Letgo.
6. Reduce your expenses.
One of the positive effects of COVID is that many households have reduced their spending. Some people cut their budgets out of necessity. Others lived on less from home due to lifestyle changes. When the skies clear and life is reasonably normal, resist the urge to fall back into pre-pandemic patterns. Try to spend less on things like clothing, entertainment, and other purchases. Setting the difference aside, you won’t need a payday loan if a disaster strikes. Some financial experts even suggest adjusting the tax withheld from your paycheck so that you have more money to spend now than you will later.
7. Save money with an app.
This isn’t a source of quick buck per se, but the right app can go a long way in ensuring that you aren’t desperate enough to consider a payday loan the next time an emergency finds its way to your doorstep . Acorns is the original Roundup app – it rounds each purchase up to the nearest dollar and invests the difference. Chime has cool auto-save features and allows you to get cash from your paycheck early on. A good app and a bit of discipline now could give you the financial headroom you need to never have to worry about payday loans again.
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Andrew Lisa contributed to the reporting for this article.
Last updated: June 10, 2021
This article originally appeared on GOBankingRates.com: 7 Ways To Get Quick Cash In addition to Risky Payday Loans