A payday loan is an amount you borrow with a promise that you will pay off the debt as immediately as you receive your next paycheque. The term of these loans varies between 14 and 30 days, depending on the size of the loan. However, the maximum limit for payday loans is restricted to £1,000.
These loans are the quickest funding sources lent at high-interest rates. Even if your credit history is bad, a lender will transfer funds the same day you put in the loan application. Though payday loans are the quickest funding sources, they are notorious for high-interest rates. Most of the borrowers fall into debt because they find themselves broke on the due date.
These loans seem affordable to you because they come with a minimal amount, but the length is so small that you fail to arrange money by the due date. Once you fall behind repayments, the lender will charge interest penalties and late payment fees. This adds up the cost of the loan, making the repayment more difficult.
More than 80% of borrowers fall into debt after taking out payday loans. Well, when you need money to fund unexpected expenses, you have several alternatives.
Bad credit loans with no broker
Bad credit loans are the best alternatives to payday loans. One of the benefits of these loans is you can borrow a large amount of money. Like payday loans, bad credit loans are also small loans, but unlike payday loans, the length of these loans varies between three months and three years.
The maximum amount you can borrow through bad credit loans is £5,000 depending on your affordability. Since your credibility is in question, you will end up paying high-interest rates, but they carry lower interest rates than payday loans.
These loans are more affordable than payday loans because you will repay the loan in fixed installments. If you apply for loans for bad credit with no guarantor and no broker with a direct lender like British-lenders.uk, you will not have to pay broker fees. No broker involvement also makes the loan cheaper.
Use your credit card
Credit cards are a better option as long as you do not need a large amount of money. You do not need to apply for payday loans if you need £100 or £200. However, this option works if you have not maxed out your credit card limit.
A credit card is like having a loan for the amount you spend using your card. Your credit card company will provide you with a grace period. If you pay off your debt in full each month, you do not need to pay interest. However, this facility is not available if you withdraw cash. Interest will be charged daily from the date you withdraw money.
You need to be very careful with the use of credit cards. Financial experts suggest that you should use the credit card for purchases instead of withdrawing cash because the latter charges a higher interest rate.
Short term loans
Another affordable alternative to payday loans is short term loans. The length of these loans cannot be more than a year. Compared to bad credit loans, the size of the short term loans is a bit smaller. Since you will pay off the loan in fixed installments, it will be less risky.
As you know the amount you need to pay down every month, you can make a repayment plan to avoid falling behind repayments. If you borrow a small amount of money, for instance, £500 to be paid back in a month, a lender will allow you to repay weekly or bi-weekly. Whether the installments are weekly or monthly, it will be easier to pay back.
Borrowing from family and friends
It may seem very awkward to ask for money from friends and family, but this may prove a better option than payday loans. Financial assistance from your friends and family may help you avoid interest payments. However, you will need to prove your repayment capacity.
No one will be ready to lend you money if you do not convince them that you will pay back the money. Try to make a repayment plan and show it to them. This will give them a chance to believe in you.
Text loans are similar to payday loans, but they work differently. When you have an urgent need for money, you will need to send a text to your lender, and you will get cash within a couple of minutes. To apply for text loans, you need to be registered with a lender.
The bottom line
Undoubtedly, payday loans are costly, but thankfully, there are various affordable alternatives to them. Experts suggest that you should take out a loan based on your affordability. Otherwise, you will fall into debt.
Description: Bad credit loans, short term loans, credit cards, text loans and borrowing from friends and family are the best alternatives to payday loans.