Common Alternatives to Payday Loans

The payday loan business is a $40 billion dollar per year industry, and it's busier than ever thanks to the poor economy and many people's lack of access to traditional banking and credit. While most people think of payday lending as being the province of minorities and the poor, the WSJ reports that these loans are increasingly being used by once-wealthy people who are feeling the economic crunch. It doesn't matter if you're earning $25,000 or $250,000 per year- if you've ever had a payday loan, you know they are not cheap. Many come with interest rates of 400% or more, but that's just one danger. Here are some better alternatives to payday lending.

1. Ask your employer for a cash advance. Instead of getting a payday loan, go to your HR department and inquire about a payroll advance. Companies don't advertise this option, but ever since the recession began, many employers have quietly begun offering this option to workers.

2. Ask a non-profit organization for help. Regional and local groups are frequently offering financial help to those who have nowhere else to go. A quick internet search will yield quite a few names- contact a few of them and inquire about financial assistance. For instance, an Arkansas group offers loans of up to $500, which can be repaid over sixteen months.

3. Use a credit card or balance transfer check to get a cash advance. An advance from a credit card comes with a 1-4% fee, and interest rates are between fifteen and twenty-five percent, but that is still better than going to a payday lender. When used wisely, a balance transfer may even bring up your credit score.

4. Get a small loan from a bank. Even though the economy has made it harder to get a loan, many lenders are stepping up to compete with payday loan offices. As of the beginning of 2011, nine banks started a program called FDIC Model Safe Accounts. Here, one can get a small dollar loan up to $2500 in just one day.

Payday loans can be a viable source of quick cash, if they are used carefully. However, there are many less costly and just-as-effective alternatives. Before signing for a payday loan, research some of your other choices and decide if one of them would be a good fit for you.