The COVID-19 pandemic started in late 2019, but its adverse effects are still heavily felt in 2021. With the rules and regulations in place, many businesses were forced to close down, spiking the unemployment rate in the country. Even with the stimulus checks given by the government, it’s still not possible to alleviate the financial burdens, which a lot of Americans bear to this day. So, they resort to alternative options such as payday loans.
Payday loans are handy, especially if you’re good with managing money. However, it can become a double-edged sword if you fail to repay it as the interest goes up. Also, it has a bad reputation because it’s used by many scam lenders on the internet.
Fortunately, there are a lot of alternative financial solutions other than payday loans. They may not be as easy to get as payday loans, but you can rest assured that they are safe and better alternatives. Here are some of them.
Bad Credit Loans
When consumers have bad credit, they have fewer loan options and have difficulty getting approved for conventional loans. And, even if they manage to get hold of a loan, it most probably comes with a high-interest rate and a low borrowing limit. If you have a conventional loan like a personal loan, you can compromise with these things, but taking a bad credit loan is a better option since they are more suited to people with bad credit or individuals building their credit score.
So what are bad credit loans? Bad credit loans are essentially personal loans for people with bad credit or no credit. People who take this type of loan use it for financial emergencies like car repairs, medical emergencies, and debt consolidation. The only difference between personal loans and bad credit loans is that bad credit loans are usually negotiable.
A cash advance is a short-term loan that you can get from either a lender or a bank. This term also refers to the ability to take a loan from a credit card issuer with the client’s remaining balance in their credit card. Cash advances typically carry steep interest rates, but they are generally well-liked since they are quick and easy.
One of the most common types of cash advances is the credit card advance. It’s essentially taking out a loan with your remaining balance on your credit card. The money can be withdrawn directly from the bank, ATM, or a check. Don’t forget to read the repayment terms carefully, as cash advances have a higher interest rate than the regular purchase. The APR is about 24%, which is about 9% higher than other types of loans.
Cash advances also have high fees, which can either be a flat rate or a percentage of the advanced amount. Also, when it comes to credit card cash advances, they carry a separate balance from your credit card purchases. However, the monthly payment can be applied to both.
If you’re running a business but struggling to stay afloat, merchant cash advances are the way to go. They are loans that you can receive from alternate lenders or banks. They still work like cash advances, but they are paid through the business profits. The best thing about merchant cash advances is that they can still be used even if your business has less than a stellar credit score or no credit at all.
Home Equity Loan
Home equity, home equity installment, or a second mortgage loan can be taken against the equity of your house. However, this can be risky because if you fail to repay, you might lose your home. So how does a home equity loan work?
A home equity loan works like a mortgage, which is why it’s commonly known as “the second mortgage.” You will essentially be borrowing against the equity you have paid up so far, and your house will act as collateral. However, the amount you can take from your equity will depend on your lender, who will calculate the current value of your house in the market.
Like conventional loans, you pay the loan in a set repayment term, with monthly payments and interest rates. A home equity loan is a quick way to turn your equity into cash. But as mentioned earlier, you should be careful since you’ll lose your house if you fail to pay it. Also, be aware of your home’s current value in the market, as it will dictate how much you can borrow from the lender.
Many alternative options for payday loans, such as home equity, bad credit loans, line of credit, personal loans, and cash advance, are available that are quick and easy to apply. There are countless online lenders in the market like CreditNinja who can help you in an emergency. Arguably, the best option among the examples above is the cash advance. They might be costly, but they are a quick fix to unexpected financial trouble. But, in the end, it all depends on your financial situation.