Loans You Can Get With Low Credit That Isn’t a Payday Loan
Payday loans are widely accessible; however, they may not be the ideal financing option due to their high-interest rates. Alternatives to payday loans can offer much-needed respite from the over 400% APR that payday lenders might impose. Furthermore, alternative loan types may have longer payback terms, allowing you to make relatively small monthly payments while paying off debt. Even if you have poor credit, it is worth looking into other options before taking out a payday loan.
What is a Bad Credit Loan?
The term "bad credit loan" simply refers to a loan available to persons with credit concerns, such as late payments, excessive credit use, foreclosure, accounts in collection, or bankruptcy. Lenders often view these concerns as risk indicators, and they might make it difficult to obtain approval. Many persons with problems like these are nonetheless considered for so-called negative credit loans.
A payday loan is one type of low credit loan. Payday lenders often do not conduct credit checks. Therefore many people with bad credit turn to them. However, excessive fees (which can translate to exorbitant interest), extra expenditures, and short payback terms make it impossible to repay these loans on time, trapping many people in a debt cycle.
If you need money quickly, installment-based bad credit personal loans may be a better alternative, depending on the terms. While payday loans must typically be returned on your next payday, installment loans may provide a more reasonable payback time. The caveat is that if your credit isn't perfect, the expenses might still be prohibitively high.
Other Alternatives to Payday Loans
If feasible, it's ideal to avoid borrowing while you save money or focus on improving your credit so you may qualify for a reduced interest rate in the future.
But, if you genuinely need the money and want to avoid the fees associated with a payday loan or a bad credit personal loan, here are some more options:
1. Payday Alternative Loans
Payday Alternative Loans (PALs), which are only available through credit unions, have strict criteria that limit the fees you pay and the amount you borrow. Application costs, for example, are limited to $20 or less. You can borrow between $200 and $1,000, with a repayment period of up to six months.
2. Credit Cards
Credit cards enable you to spend money instantly or borrow against your credit limit with a cash advance. It's much easier if you already have a card open. You may also apply for a new credit card and receive an approval decision quickly. Although interest rates may be somewhat high, credit cards are typically less expensive than payday loans, and you may have greater repayment flexibility.
3. Borrow From Friends or Relatives
If you're in a tight spot financially, a family and friends loan might be an excellent option to avoid a high-interest payday loan. You could even be able to borrow money with no interest.
Put your loan arrangement in writing, regardless of the interest rate you choose. This contract should state the amount borrowed, the interest rate or collateral utilized, the payout time, and the payment amounts and due dates.
Failure to pay your dues not only harms your credit, but it may result in legal action and a lost friendship or strained family situation.
4. Earn a Side Income
Taking up an extra job to cover unforeseen needs might help you avoid costly loans that lead to further debt accumulation.
Before taking out any loan, determine a budget to determine how much (if anything) you can afford to borrow and repay over time.
If you can, postpone taking out a loan until you've had an opportunity to improve your credit, which can raise your chances of approval or qualifying for a reduced interest rate.
If you can't wait, examine the expenses of all your alternatives before diving right in.
Gadsden Finance is a loan company in Gadsden, AL, that offers a wide range of personal loan sizes with a transparent fee structure. Your financial wellness is our utmost priority. Get in touch with us today so we can discuss a personal loan that fits your needs!