Payday loans have been talked about a lot in the media recently. Many government officials and financial experts warn that they are designed to take advantage of the poor, with the high interest rates and charges. These loans are certainly controversial but to say that all payday lenders prey on the most vulnerable members of society is a gross over-simplification and does not recognise the good work being done in this sector by the very many responsible lenders out there – exactly the kind of lender that we at Alpha Loans actively promote.
While there is an element of truth to the criticism, it is not entirely correct. For example, millions of people use payday loans every year, and only a small percentage end up struggling to pay them back. Used properly – as we have said many times on these pages – payday loans can be an invaluable budgeting tool.
With this in mind, if you feel that a payday loan can help you out, you can visit many websites online quickly and conveniently and get a decision on your application in minutes.
However, if you don’t think that this is the right way to go for you, then the following information will let you know how to avoid payday loans.
One of the best ways to avoid payday loans is to have an emergency fund set-aside that you can dip into when faced with mounting bills.
This fund doesn’t need to be large, maybe a couple of thousand pounds or dollars, just enough to see you through short-term cash flow problems. Even if you are flush with funds and are looking perhaps to make some investments for the medium to longer term its always a good idea to ensure you have some cash available should you need money in a hurry.
So how do you go about establishing an emergency fund? It’s quite simple, really, as long as you are in gainful employment and have a bit of self-discipline. All you need to do is to put away a share 0r percentage of your wages every week, and in only a few months you will have the security of an emergency fund so you don’t need to apply for payday loans.
If your credit score is in good standing, then it is a much better option to apply for a credit card rather than a payday loan. Credit cards usually come with much better interest rates, and in some cases they even offer 0% for the first 6 months or year. As with all consumer finance products it pays to shop around. If you cannot access a zero per cent deal then try to go with a card which offers the best rate of interest. And don’t forget cashback cards which effectively pay you for shopping with them. They may carry a higher rate of interest than some other cards but this could well be offset by the benefit of the cashback you receive. If you are looking for the best choice in credit cards there are a number of different options online to seek them out.
One overriding point to bear in mind when it comes to credit cards – and it applies equally to payday advances. Once you get your credit card, resist the temptation to use it for casual purchases. Instead, only spend on it when it really is an emergency. If you do this, then a credit card is an excellent alternative to payday loans. It is also worthwhile setting up a direct debit to pay off the balance on your card each month. This way, you will not find yourself having to cope with ongoing interest payments.
Extend your overdraft
Another way to avoid payday loans is to extend the overdraft at your bank. Overdrafts are not cheap, and there will almost certainly be an arrangement fee payable for setting up the facility. However, overdrafts typically have a lower rate of interest than payday loans, which make them a great choice when you are short of cash.
Consider visiting your bank to speak with an advisor. You can explain your situation and then ask for the extension. They will then come to a decision based on your current income level and your past history with the bank.
Just remember though, if you do get an extension to your overdraft, you must aim to pay it back as quickly as possible. You don’t want to end up relying on it for the long-term.
Consider a guarantor loan
It may be that you are thinking about a payday loan in the first place because you have had some credit problems in the past, which might in fact be sufficiently serious to rule out applying for a credit card or an overdraft, as suggested above. If this is the case all is not necessarily lost. If you have a relative or even a good friend whose credit status is satisfactory – you may be able to apply for a loan with a guarantor or co-signatory. The Independent newspaper published an excellent article – here – on whether a guarantor loan is the right choice or not. The main benefits of going down this route is that the interest rate available under a guarantor loan is likely to cheaper than that available with a payday loan and also that the loan will almost certainly be available over a longer term, meaning it dos not need to be paid back as quickly as a payday advance.
However you need to be aware that if someone stands as your guarantor they could wind up being responsible for the entire debt in the event that you default. As such, it’s only really appropriate for cases where you are virtually certain – or as certain as you can possibly be – that you will have no problem repaying the loan.
So there you have it – several alternatives to using the services of a payday lender. Whether you ultimately opt for a payday loan or for one of the options outlined above will depend largely on your circumstances. Whichever choice you make, consider your options carefully before committing.