How to Find Better Alternatives to Payday Loans

Life is full of surprises, and some of those can impact your budget at an inopportune time. A surprise car repair, medical bill or other expense can cause you to think about simple, fast loans like payday advances.

However, payday advances are detrimental to your finances. While they may seem like simple, fast loans, the average interest rate of a payday advance is almost 400%, making it much more difficult to repay it within the tight window of just a couple of weeks.

Instead of going down this road, consider the alternatives to expensive payday lending. That way, you can receive cash advances without the high interest rates.

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    6 better alternatives to payday loans 

    Use a paycheck advance app 

    There are paycheck advance apps like Earnin and Dave that offer you money in an emergency. Many of these apps work by having you sign up for an account, then link your bank account to verify income. However, in Earnin’s case, you can also upload an approved timesheet or let the app use location services to determine when you are at work.

    After doing so, the app determines if you are eligible for an advance. If you are, you can take it at that time (in some cases receiving it the same day) and repay it on your next payday. Earnin and Dave do not charge fees. Instead, you can donate to help them offer the platform to those who need it.

    Apps like these are perfect if you need to use them in a pinch. However, over time, those donations can add up. And the short repayment window means you could get on a cycle of repeatedly using them to make ends meet.

    ProsFast set up
    Money same day
    No interest
    ConsMust link a bank account
    Short repayment time
    Cycle of financial dependence

    [ See: Emergency Loans: What They Are and How to Get One ]

    Borrow from a friend or relative

    If you do not want to go the payday or alternative credit union route, you could ask your friends or relatives to borrow money. In some cases, it could be more financially-friendly for you since you won’t have to pay the high interest rates associated with payday loans.

    Moreover, it’s vital to be on the same page when it comes to repayment. Let them know the reality of your situation and when you intend to repay them. Doing so ensures both people know what to expect before going into this venture.

    The pros of this approach are you might be able to dictate terms more so than you would with a lender. By informing them of your situation, together, you can construct a repayment plan that works for both.

    Of course, if you do not repay them, then you could fracture a friendship or relationship with a loved one, which is far worse than a blemish on your credit report.

    ProsFlexible repayment
    Financial accountability
    It can be cheaper
    ConsIt’s uncomfortable to ask
    Could fracture relationships
    You might not dictate terms

    Pawn or sell things you no longer use

    Selling or pawning valuable items can help you receive the money you need in a pinch. Selling is the smarter option if you do not mind parting with the item(s) permanently. There are many online marketplaces available for you to use, and you could have more control over how much you charge for it.

    Meanwhile, pawning can be a more expensive, short-term option. With pawning, you bring your stuff to a pawnbroker, who, if interested, will loan you money. The loan is a fraction of what the actual value of the item is. If you do not come back in to pay off the loan, they will sell your item.

    Of the two, selling might net you more money than pawning your items. However, with pawning, you do have the option of getting your item back as long as you repay the loan in the time the pawnbroker gives you.

    ProsEasy to sell
    Selling gives you flexible terms
    Pawning gives you fast cash
    ConsPawning is expensive
    Selling can take time
    Might not receive item’s value

    [ Related: 7 Ways to Avoid Debt in a Financial Emergency ]

    Get a side hustle

    A side hustle is like a part-time job in that you can supplement your income each month, reducing your need to borrow money from lenders or family members. Most important, it can be a longer-term solution to helping you balance out your budget.

    Best of all, there are many side hustles you can do. You can shuttle people across town through ridesharing apps, deliver food, receive payment for pictures you take and even earn income by renting out your car for use.

    As you can see, there are many options available for doing this. However, it’s smart to research each in more detail before doing one.

    To demonstrate, while you can make money doing a rideshare gig like Uber, the job requires significant wear and tear on your vehicle, not to mention the added costs of fuel, insurance, tolls and more. Therefore, be sure to research the risks associated with the side hustle before committing to one.

    ProsSupplement incomeGigs are easy to doUse your assets for cash
    ConsWear and tear on car
    Pay is inconsistent 
    No work/life balance

    Ask your employer for an advance 

    If the other alternatives are not viable for you, you could ask your employer for an advance on your paycheck. While each company has differing policies on how it approaches employee advances, in general, how it works is you get your paycheck just a few days earlier than you normally would.

    It might be a better short-term option since you do not incur hefty interest rates or fees as you would with payday loans and pawning. And the process can be easy if your employer has a policy in place for advances.

    That said, there are some things you want to consider. One, you might have to repay the advance on your next paycheck. If your finances are tight, it could open a door where you have to use an advance regularly. Two, your employer might cap how many advances you can have. Therefore, while it is a convenient way to receive short-term help, it also comes with some considerations.

    ProsEasy to do
    Could have flexible repayment terms
    Fewer fees
    ConsCould have tight repayment window
    Caps on advances
    Not a long-term solution

    Adjust your tax withholding

    Are you receiving a large refund when you file your federal taxes each year? If you are, then adjusting your tax withholding with your employer might be a wise option to try.

    How it works is you can request a new W-4 from your employer. From there, you can adjust your withholding to include any changes that have happened in the past year. To demonstrate, if you were married but are now divorced, you might qualify for head of household status, entitling you to higher deductions and a lower tax liability.

    Furthermore, if you recently had a child, you receive a $2,000 deduction. Therefore, as your life changes, it’s ideal to reflect that on your withholdings.

    However, if you do not receive a refund on your tax return and change your withholdings to squeeze more money out of each paycheck, know you could have a huge tax liability when you go to file.

    ProsChange W-4 at any time
    Receive deductions
    More money on each check
    ConsWon’t apply to everyone
    You might owe taxes
    Changes take time to implement

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    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Sean Jackson

    Contributing Writer

    Sean Jackson is a creative copywriter living in Florida. He’s had work published with Realtor.com, theScore, ESPN and the San Francisco Chronicle. In his free time, Sean likes to play drums, fail miserably at improv and spend time at the beach.

    Reviewed by

    • Courtney Mihocik
      Courtney Mihocik
      Loans Editor

      Courtney Mihocik is an editor at The Simple Dollar who specializes in personal loans, student loans, auto loans, and debt consolidation loans. She is a former writer and contributing editor to Interest.com, PersonalLoans.org, and elsewhere.