Loans & Credit
Sometimes we get into tough financial situations, and we make it worse by looking for a quick fix.
If you are behind on your bills or are drowning in credit card debt, chances are you might have been tempted to take out a payday loan.
A payday loan is typically a loan between $100 to $500 that you are required to pay back from your next paycheck. The problem is these loans can be more damaging than they are helpful because many have interest rates that exceed 400%.
What Is a Payday Loan?
Payday loans are a short-term borrowing solution where you obtain a high-interest loan based on your credit profile and income. They may also be referred to as check or cash advance loans. The loan amount is usually a portion of your next paycheck. As mentioned, these loans can carry crazy interest rates for short-term borrowing.
What to Do Instead
Many people cannot afford to pay payday loans off within a couple of weeks. So, they either roll the loan over or take another payday loan out to pay off the first one. It becomes a vicious cycle of debt. You should consider better alternatives to payday loans.
Ask Family or Friends for Help
Ask a family member or a friend if they would be willing to make a short-term loan to help you out of a tough situation. If they agree, you should put the loan agreement in writing, providing them with a period in which you will pay back the loan. You should also offer to pay them a reasonable, but friendly, interest rate. If they can’t help you financially, perhaps they could help with things like sharing meals, free child care, or other assistance.
Sell some valuable belongings.
You can sell valuable items through a yard sale or at a pawn shop. You can put your belongings up for auction on sites like Facebook, Craigslist, or eBay. Selling belongings for fast cash is definitely a better solution than taking out a payday loan, especially if they are items you do not need.
Get a second source of income
A temporary or additional part-time job might be needed for covering extra expenses. Today, there are a lot of side gig opportunities, including dog sitting, rideshare driving, and even grocery shopping. If you have substantial debt, you might require more funding than what a short-term payday loan can provide. Ask your family or friends if they can help watch your children so you can get a second job.
Seek the help of 1st Source Bank
We have financial Education assistance, and we can sometimes help with overdraft fees if you talk to us. We may be able to provide a short-term solution with reduced fees. We can’t promise anything, but it doesn’t hurt to ask. We are here to help if possible.
Remember, payday loans, while a standard solution for paying off debt, come at a high cost, and they can be more damaging than they are helpful. So, it is always better to seek alternatives to payday loans whenever possible.
© Fintactix, LLC 2022