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Payday Loans Are Risky Route to Quick Cash

Published: Thursday, November 20, 2014 at 10:23 p.m.
Last Modified: Thursday, November 20, 2014 at 10:23 p.m.

The holiday shopping season is coming up, and people in search of some quick spending capital might strongly consider taking out a payday loan. Think about it — it’s a quick source of cash without the need for the credit checks. It sounds too good to be true.

That’s because it is.

More than 19 million people struggling with their finances take out one of these unsecured personal loans each year without seeing the danger signs pointing to their finances, like insanely high, triple-digit interest rates.

Before funding your post-Black Friday Christmas shopping with a payday loan, look at some of these simpler — and reasonably safer — ways to get some money fast.

1. Take out a payday alternative loan.

Yes, these actually exist. Veridian Credit Union, for example, offers a payday alternative loan with a maximum loan amount of $1,000 and a six-month repayment term at an interest rate of about 20 percent (usually regardless of a borrower’s credit score). While not the lowest interest rate, it’s more manageable than the high interest and short repayment terms of a payday loan. Another option is to consult with your bank or credit union about a small personal loan with better security, terms and interest.

2. Get a cash advance from your credit card.

Another similar yet less expensive option is to contact your credit card carrier for a modest cash advance. Again, the interest rates might not be the lowest, but this time, you’re borrowing against your own credit limit and not some third-party payday provider. If the cash advance option seems too insurmountable to you, simply use your credit card for your holiday shopping and avoid using it again until you’ve paid down your balance.

3. Withdraw from your emergency fund.

If the added interest of using your credit card is too much to deal with, you can always try taking just enough cash from your emergency fund to cover holiday shopping expenses. Since you act as your own lender here, this loan is entirely up to you to repay — but financial discipline is important. Let too much time go by, and you might never get around to replenishing what you borrowed, and you might not have enough money if a real emergency arises.

4. Ask your employer for an advance.

Your job might permit you a cash advance taken from your next paycheck. It’s not a loan, so you won’t have to deal with interest or repayment because it’s money that you have earned. However, keep in mind that if you ask for $200, be prepared for your next paycheck to reflect that difference. It’s also wise not to make a habit of asking for cash advances. Request some holiday overtime; the extra hours can yield you some extra cash.

5. Sell, pawn or auction off unwanted belongings.

Now’s a better time than ever to sell some of those old things taking up space in your house. It could be anything from a used cellphone to furniture, vintage clothing, appliances and more. Go the online route, like eBay, Amazon Marketplace or Craigslist. Visit local pawn shops or thrift stores and see what they’ll offer for your items.

6. Reduce your spending.

In the spirit of the holidays, is there anything you can temporarily cut back on — or eliminate entirely — to gain some Christmas cash? Put your gym membership on hold for a month or two, cook at home more than eating out, and save on gas by taking public transportation. Aim to spend less disposable income on clothes and entertainment. Some financial experts even suggest adjusting the tax withheld from your paycheck so you’ll have more cash available now versus later.

7. Open a holiday savings account.

This is not a source of “quick” money per se, but if you’re in a cash crunch this holiday, open a savings account designed to save money for holiday shopping. Your bank or credit union of choice might have its own version that can give you higher interest and generous deposit limits. Start now and have plenty of reserve money available by Christmas 2015.

Use these tips as a start and brainstorm some more ways you might be able to save money during the holidays. Asking a friend or family member to lend money can be a good option during a financial crunch or crisis, but it’s not always recommended. Borrowing from parents or siblings and then using that money to purchase gifts for them isn’t very considerate.

Continued here:
Payday Loans Are Risky Route to Quick Cash

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