There’s absolutely nothing worse than payday loans that trap you in a cycle of debt and plummet your credit score. So, we’ve researched the safest six alternatives, and the first one you don’t even have to pay back.
1. Hardship Grants
Hardship grants are the closest thing to free money that you can get. They’re ideal for anyone who’s going through some recent hardships like a medical emergency, losing their job, or even just falling behind on rent. You don’t even have to repay the money if you qualify. So, where can you get these grants from? The most popular are local nonprofits, religious groups, utility companies, or government programs.
It might take a bit of digging to find a grant that you actually qualify for, but this is free money for things like rent, car repairs, or medical bills. There are millions of dollars available in grant money.
However, with grants, there isn’t a guarantee that you get approved. And on the chance you do get approved, it can take weeks to get the funds. So, if you need money today, grants probably aren’t the best option.
A lot of grants are for one-time use only, so if the grant doesn’t resolve your hardship, you could find yourself in the same spot pretty quickly.
2. Credit Unions
Credit unions are local nonprofit lenders that focus on small dollar loans, usually between $200 and $1,000. Unlike payday loans, you get fixed monthly payments, much lower interest rates, and they report to a credit bureau, so paying on time boosts your credit score.
Even if you’ve had credit issues, credit unions often work with members to find solutions. You usually need to be a member, but joining is often as easy as opening up a savings account.
3. Personal Loans
Personal loans are safer and often larger than payday loans. When you apply, usually online, and get approved, the lender gives you money that you’ll pay back in monthly payments. The interest rates are usually lower than payday loans. Repayment periods are months instead of weeks, and they deliver funds just as fast, usually same day or next business day.
But the problem can be getting approved because some lenders have minimum credit score requirements. However, even if you have bad credit, you could still qualify for loans ranging from $300 to $5,000 with CreditNinja. If you’re interested in personal loans, you should check out CreditNinja.
4. Paycheck Advance
Another option is a paycheck advance either through your employer or an app like Ernin, Dave, or Bridget. Paycheck advances essentially let you borrow money you’ve already earned. But unlike payday loans, these apps don’t have interest or credit checks.
The way they work is by connecting your bank account to the app and then it sees how much you make. Once you borrow money, the app will auto withdraw the same amount on your next payday. You can get up to $150 per day or $750 per pay period depending on how much you make. And if you’re late with the payments, they don’t show up on your credit report. However, if you don’t pay anything back, eventually your account could get sent to collections and that would show up on the report.
So, what’s the catch? While there is technically 0% interest, there are fees that get charged by using the app and they can get expensive. To get your money fast, most apps will have their own version of an express option, which is around $2 to$10. Plus, a lot of these apps have an option where you can tip them, usually between 5 and 15 bucks. And while the tip is technically optional, if you don’t tip, you may have reduced withdrawal limits or it could take much longer to get your money. So, expect a lower quality version of the app if you don’t tip.
Online cash advance loans are a great option if you don’t get into the habit of borrowing from your future paydays every week, but only occasionally when you really need it.
5. Buy Now, Pay Later
You’ve probably seen this one at checkout. Buy now, pay later (BMPL). Apps like Klarna, Afterpay, and Affirm. Now, instead of paying for your items online in full, you can buy them in smaller increments at 0% interest. This is great if you want to avoid a big hit to your bank account all at once. But you have to be careful.
There’s a growing trend where more and more people use these apps and a lot of them don’t know how they work. These purchases need to be treated like loans. Yes, there’s 0% interest for a period of time, but if you miss payments, interest starts to kick in and it could hurt your credit score. And if you have too many BNPL loans at once, it might impact your ability to borrow in the future. So, use these for essential expenses, not splurges. And never juggle more than you can track.
6. Secured Credit Cards
If you want to build your credit and get some money, secured credit cards are a great option. So, here’s a sample breakdown of what makes regular credit cards and secured credit cards different:
- Unsecured cards come with the limit set by the bank, usually over $1,000. And you don’t have to put any money down.
- With secured credit cards, you give the card provider money upfront, which is usually your credit limit. So, if you put $500 down, you can put up to $500 on your card. If you have lower credit, it’s hard to get approved for unsecured cards.
But secured cards are still a great way to help in a financial emergency, even if you’re tight on cash. Let’s say you need $200 and only have $250 in the bank. If you put down a deposit of $200, you can get a card with a $200 limit. And now, whenever you need to buy something, you have this $200 limit that you can always tap into. Unlike payday loans with their two-week repayment plans, credit card bills won’t be due until one month after your bill’s closing date.
Also, credit card interest rates are usually much more affordable than payday loan rates. So, if you fall behind on payments, credit card debt would be much easier to manage. Plus, when you pay back your credit card on time, your usage gets reported to the credit bureaus and boosts your credit.
Final Thoughts on Payday Loan Alternatives
Before you apply for any of these options on the list, you should try to boost your credit score as much as possible. A higher credit score means you have better chances of getting approved for low interest loans. Even small improvements like going from 580 to 620 can save you hundreds or even thousands.
Here’s a tutorial on some really simple ways to boost your credit score 100 points by your next credit report:
