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How You Can Avoid Payday Loans?

ElitePersonalFinance
Last Update: April 9, 2025 • Loans •

Payday loans look like a great way for some cash to help you make it to your next payday. These companies basically offer you a cash advance based on your need. They provide a beneficial service for those who find themselves in a financial pinch and need something quick. A payday loan can be obtained and used for paying a utility to avoid a cutoff, keep up a timely payment like for a car, for emergency car repairs, or if you have an emergency and need to make an unexpected trip. These are some of the primary reasons people take out a payday loan. They can be handy in certain situations, but there may also be other viable solutions for many individuals.

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Why Payday Loans Should be Avoided if Possible

Payday loans are a solution when someone is in a tight spot with their finances. These are legitimate companies offering financial services to someone who needs it. But there are a few reasons why you want to look for other alternatives before you head down to sign on the dotted line. Here are the top three reasons it is advisable to avoid a payday loan and find other solutions when possible:

  • Payday loans are costly.
  • It’s easy for it to become a cyclical process that is difficult to escape.
  • You have to give the payday loan company access to your bank account.

These are good reasons to search for alternative means to obtain extra cash or emergency cash when needed. Many other alternatives do not trap you in a debt cycle and are less expensive than a payday loan.

How to Avoid Payday Loans?

Even though payday loans are a viable option when you are in a pinch, some other alternatives are worth considering. If you know the variety of available options, you can decide which one to pursue and which one is best for your present situation. You are certainly capable of making the best choice when you are armed with the right information. If the situation arises and you feel a payday loan is the best option, make sure you understand all the terms from the lending facility before taking out the loan. No matter what option you choose, make it your priority to pay the loan back as quickly as possible.

Get Loan from Bank or Credit Unions

Other loan options are available through lending institutions. In some instances, your bank can offer a small loan with a variety of payback options. Sometimes it’s a lump sum payment, or it is paid back in monthly installments. In many cases, there is a 90 day repayment period, and you don’t have to have any collateral. There are options if you want to renew the loan a time or two. However, if you have to renew short-term loans too often, they will not really help you out very much.

Credit unions are another great place to get a cheap loan.

Discuss with Creditors

In some instances, you may consider taking out a payday loan for a quick fix to make a payment to other creditors. Even though this might seem like a good idea, it can cost you more in the long run. As an alternative to taking out a payday loan and creating more debt, talk directly to your creditors about making payment arrangements. Many times they will make negotiations for partial payments or work out an alternative payment plan for consumers. It might be that they can refinance so that the bill is paid off but taking a longer amount of time.

Employer Advances

Some employers will grant an advance to their employees in some cases. It is an advance on what you will make, but it is not a loan, which means no interest is charged. You will have to make adjustments as you realize your next check will be shorter than it would have been had you not taken out the advance funds. But it is cheaper than a loan of any sort. Just be sure to make appropriate adjustments so you are not left in a bigger bind.

Borrow from Your Retirement Account

If you have a retirement plan like an IRA or 401K, you may pull funds from any accrued amount. It’s more like you are borrowing from yourself rather than from an outside lender. You are allowed to borrow from an IRA without penalty once a year as long as you put the money back into the account within a 60 day period. If you do not make the deadline to pay the funds back, you have to pay taxes on the money and a penalty of 10% if you are under 60 years of age.

Not all employers offer 401K loans, but they can borrow up to half of your balance and have 5 years to pay it back if they do. If you don’t make a payment on it for 90 days, it will be considered taxable income, and it will have the same penalty as an IRA loan. One note on borrowing from your 401K is that you may be missing out on interest you would have gained or any returns on investments that the money in your account would have produced.

Credit Card Cash Advance

Most credit cards have the option of withdrawing cash as long as the account is in good standing. This is a rather expensive choice, but it is an option you have available. You’ll pay somewhere around 5% for a cash withdrawal fee plus interest charged on your credit card balance. Do some math because, in most cases, this is still a cheaper option than a payday loan – but not always.

Use One of The Programs Designed for Emergency Assistance

Many organizations provide emergency assistance to help avoid suspension of utilities or deal with a family emergency. Faith-based and community programs often offer funds for these specific types of situations. There are also special federally funded programs that help low-income families meet their basic needs and help to pay for heating or cooling costs in emergencies. Some of these alternatives have specific stipulations or eligibility criteria that must be met to obtain assistance.

Sale Items at Local Pawnshops

There are pawnshops in most cities. You can take in items you no longer want, such as musical instruments or small electronic devices, and exchange them for cash. It’s a way to get the money very quickly. It’s technically a collateral-based loan, and it will cost you more if you decide you want the item back. You have a specific amount of time to pick up the item and pay the extra fee if you want to get it back. These loans are handled differently in each state, so the finance charges can differ depending on the region you are in.

Borrow The Money from a Friend or Family Member

Most of us have caring friends or family members who we trust and really do not want to see us in a bind. They may be willing to offer you some money to help you get by to payday, so you don’t have to pay the extreme interest on a payday loan. It is advisable to get the terms for any loan in writing. When you have a predefined date, the money is due to them. It is easier to keep up with so that you don’t forget. This helps you preserve the relationship. Be sure to write down whether they want you to pay it all back at once or if making small payments is satisfactory.

Work from Home

Find work online if you need more money and don’t want to continue paying the high interest on payday loans. If you have a skill, you can try freelancing, or you might benefit from a weekend job for a short time until you can get ahead with your finances.

Credit or Debt Counseling

If your check is always running a little bit short, most regions offer debt or credit counseling for free or very little payment. They can help you determine how to make your finances more manageable. A debt counselor can help you learn ways to reduce or get out of debt. They can also provide financial guidance to help you learn how to make ends meet by cutting costs, getting out of debt entirely, and how you can save up for emergencies in the future. They can help you create your personal debt management program.

Is There a Way to Prepare for Financial Emergencies?

It’s not possible to predict when an emergency is going to occur. But there are some ways to prepare for them should they happen. One suggestion is to maintain a savings account with a minimum balance equal to two month’s expenses. If having that much set aside is beyond your financial capabilities, try to balance that could pay your basic expenses for a month. You might even start with saving an amount equal to a single paycheck. Another way to prepare for emergencies is to keep a couple of credit cards available in case of an emergency.

Now that you know payday lenders and some other options, you can decide which one meets your specific needs. Payday loans are a good choice if you need emergency cash quickly and for a short time. Other options can also serve the need. You can choose which alternative works best for you.

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