The following is a guest blog post:
Most of us experience some financial struggles at one time or another, and often, it means we have to think of ways to get some form of credit to see us through a big bill or unexpected expense. There are a lot of financial products out there that can help, and of course, one of these is the notorious pay day loan. These loans have helped a lot of people who were in a pinch financially, but as loans go, they can be quite expensive. It is certainly worth considering other options before going ahead with a pay day loan.
Here are five alternatives you could consider:
A Loan from Your Bank
If your credit rating is OK and you have a good relationship with your bank, you may be able to take out a loan with them. This will offer a more relaxed repayment schedule than a pay day loan and will also offer a cheaper rate of interest than short term loans, though how much it will end up costing you will depend on a number of factors, so it is worth using a loan calculator such as this one before deciding on a loan to apply for. If you are not so keen on your own bank’s offerings, you can also look at loan options from other major banks as an alternative to getting pay day loans.
An Overdraft or Overdraft Extension
If you have a current account in good standing, it can be an easier option than getting a loan to simply ask for an overdraft or for an extension to your existing overdraft facility. An overdraft can help you pay an unexpected bill or meet an expense without taking out a loan, and the amount your bank will allow you to have will depend on how much you earn and your credit rating, though a lot of people are able to get hundreds or even thousands as an overdraft limit. Unlike a loan or credit card, there isn’t a repayment schedule, but there are fees, so check these out and compare with a loan calculator to decide if this is an affordable option for you.
Borrow Money from Someone You Know
While it isn’t an option for everybody, some people can borrow money from a family member or friend and use this to fill the gap rather than taking out a pay day loan. If you don’t need much or you have someone you know who is in a good financial state, such as a parent or friend, it can be better to ask them for the money.
While loans can put a strain on relationships if they are not repaid quickly, if you are able to repay a pay day loan when you get paid then you can also pay back a friend or relative, and so this shouldn’t be an issue. Plus, loans arranged between people who know each other don’t usually include interest, and this is definitely a cheaper way to get the money you need.
Sell Some Old Belongings
Another way you can get the money necessary to meet an unexpected bill or tide you over until you get paid is to sell some stuff you don’t need anymore. Most people have some old stuff that is perfectly good but which they no longer want or need. There are lots of ways to do this, from local sales through to groups on Facebook that sell or trade things, and of course eBay.
There is also the option to sell some types of items to shops, for example, games consoles at games shops or jewelery at places that broker gold. Depending on how much you need and how quickly you need it, selling some stuff or pawning it can allow you to obtain some money without getting into any debt at all, and it can also give you a good way to clear out some things and free up space at home.
Use a Credit Card
Credit cards can also be a way to gain access to money you don’t currently have. You do need a good credit history to get a credit card with a good limit, so if you need a lot of money you will probably only be able to get this if you are in good financial standing, but there are credit cards designed for building up a better credit rating. These give you access to a smaller amount of money with a high-interest rate, but if you pay it back in full as you would a pay day loan, then you pay no interest and also improve your credit.
Pay day loans are necessary sometimes, but they are not good value compared with some other options you may be able to use. Consider all of these before taking one out, and always use a loan calculator first.