1. Emergency Fund
The best alternative to a payday loan is to have an emergency fund set aside to cover those unexpected expenses. Your emergency fund should be at least $1,000 to $2,000 while you are trying to get out of debt and six months of your income once you are out of debt completely. Your emergency fund should not be used to pay for things like vacations or remodel you kitchen, but it can be used to pay for a car repair or to replace your furnace when it goes out suddenly. Your emergency fund is key to helping you stop living from paycheck to paycheck. Once you have used your emergency fund you should work on replacing it right away.
2. Sinking Funds
A sinking fund is an item you include in your budget, for expenses that happen occasionally or once a year. For example if you have an older car you should be expecting to do some car repairs occasionally or to replace the tires. This type of expense can be planned for because you expect it to happen. People who do not budget can be hit hard by these expenses because they are not setting money aside to cover them on a regular basis. When you budget try to include these items in your budget so you will not need to rely on payday loans to cover those expenses.
3. Credit Cards
A credit card may be a better solution to a payday loan. The credit card charges a lower rate of interest, and if necessary you can break the payments up over a few months so that you do not end up in a cycle that is difficult to break out of. However, you should be careful about relying on your credit cards to cover your basic expenses each month. Ideally, this should only be as a last resort if your emergency fund has already covered other expenses. It is still better than a payday loan if you pay the money off as quickly as you can.
4. Small Loans Through Your Bank or Credit Union
Some banks offer a similar service as a salary advance loan as way to help their customers. Generally, the fee is lower than that of a traditional payday loan centers. The bank may be willing to break the payments up over a few weeks or months, which can prevent you from entering into a payday loan cycle. You should check with your bank to see if you qualify for something like this before you go to a payday loan place. You can also take out a small unsecured or title loan with your bank to clear up a payday loan cycle if you qualify.
5. Make Do Without
Another alternative is to try to get by without whatever you need the money for until you get paid and can afford to pay for it with cash. Otherwise you may be better off waiting to have your car repaired as long as you have another way to work every day. Although it may be inconvenient you should ask yourself if there is another way to work around the situation before you go and borrow money. Sometimes you may not have another alternative, but you should explore all of your options before you make that decision.
6. Work Out a Payment Plan
Some unexpected bills, such as hospital bills, can be set up as a payment plan and you do not need to come up with the entire amount right away. Other places may be willing to put you on a payment plan if you just ask them to do it. For example, a rent-to-own storeoffers this option. When taking this approach you need to be upfront with the person you are negotiating with and understand that the answer may simply be no. Some businesses may be willing to do a trade with you, as well. For example you could provide a new logo design for the business for the same cost as the car repair. It does not hurt to ask to see if they will consider doing this. As a last resort, you may consider an installment loan through a loan store. These are more expensive than other options, but are easier to pay back than payday loans.
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