Payday Loan Alternatives
If you need to borrow money, for whatever the reason, there are a lot of payday loan alternatives that you should consider when borrowing. Payday loans are typically very short term loans, so depending on your needs and situation, there may be better lending alternatives out there for you.
Peer to Peer Lending
The first alternative, and one of the most popular, is peer to peer lending. Peer to peer lending is where other individuals loan money to you, at interest rates that are bid on by the lenders. Basically, the more popular your loan is, the lower your rate could go. This is a great alternative to payday lending for several reasons:
First, you can get a loan for whatever reason you want. For example, there was a recent article on NASDAQ about using peer to peer lending for debt consolidation loans. Other people use these loans to start businesses or even do home remodels. Since you write your own listing for many of these sites, you can basically ask for a loan for anything. You just need to be able to convince people to loan to you.
Second, the loan length, terms, and fees are usually very good given the borrower credit profile. For example, many peer to peer loans are 3 to 5 years, which is substantially longer than a traditional payday loan. They also can have lower interest rates due to the fact that the rates are bid on by other investors.
If you still need something short term, you can look at products like the alternative offered by online lender Wonga. This functions much more like a personal loan, using other factors to decide your ability to get a loan. And because they don’t require you to fax or send in information, you can get your loan funded within 15 minutes. That is much different from a standard payday loan, where you need to go to a lender with specific paperwork and then, maybe the next day, you can get your money. You have much more flexibility too, as unlike traditional payday loans (so called because you have to pay them back on the day you get your wage, or a day set by the company), you are able to choose when to give the money back.
***Photo thanks to HelenCobain & Taxcredits***