Whether it’s an unexpected car repair or your monthly rent, not having the money you need to pay bills can leave you feeling anxious.
You may be tempted to get a payday loan to cover your expenses. However, these loans usually seek to draw you into ongoing debt rather than help you manage your personal finances.
Check out these payday loan alternatives so you can stay out of debt spirals and improve your financial situation.
A Brief Intro to Payday Loans
A payday loan is an extremely short-term loan that lets you borrow money for immediate expenses.
The loan amount is usually much lower than a long-term loan, while the interest rate and annual percentage rate are much higher.
Most payday loans require you to pay back the money in about two weeks. That’s where the name “payday loan” comes from — you’re expected to repay what you borrowed on your next payday.
Payday loans don’t require collateral and are often available for borrowers with bad credit.
Most payday lenders let you apply online or in person at a payday loan center.
This can make them an attractive option if you’re looking to get cash quickly.
Get up to $500 in minutes and build credit with Possible.
Should You Get a Payday Loan?
While payday loans get you fast cash, they’re often not the best choice.
Unfortunately, many payday loan lenders use predatory practices to lock you into a cycle of debt with fees and high interest rates.
This cycle — known as a debt spiral — happens when you can’t repay the money you’ve borrowed.
You’re forced to borrow more to keep up with payments and other bills.
Payday loans often encourage debt spirals by making it too easy to borrow money. Many payday lenders let you roll existing loans into a new one if you can’t afford to pay it off on the due date — for a fee.
This new loan doesn’t solve the original problem: that you couldn’t afford to pay back the money. Now you have even more debt to pay off by your next paycheck.
For most people, it’s best to avoid payday loans altogether and look at alternatives — like installment loans — instead.
Are There Payday Loan Alternatives?
The good news is you need fast cash is there are other loan options to payday loans.
Payday loan alternatives make it easy to get the money you need without falling victim to predatory loan practices.
Possible Finance
Possible offers installment loans as an alternative to payday lending through a short application process. You can borrow up to $500 and get your money in minutes — right from your phone.
Possible doesn’t rely on your credit score to make a decision. That makes it a great option for borrowers with no credit history or a bad credit score.
Possible loans are repaid over months instead of weeks. You can even reschedule your loan payment date to better fit your financial situation.
Possible loans are currently available in OH, ID, WA, TX, UT, FL, LA, CA, DE, IA, IN, MI, MO, MS, OK, RI, SC, KS, KY, AL and TN.
Fig Loans
Fig Loans offers short-term installment loans online. The maximum loan amount varies by state, but most are $500 or less.
Repayments are made in fixed monthly payments, with the average loan length being four months.
Like Possible, Fig accepts bad credit and no credit borrowers to help them build their credit scores with on-time payments.
Fig Loans are only available in CA, TX, OH, IL, MS, FL, and UT.
Spotloan
Spotloan is an online lender that lets you apply for an installment loan between $300 and $800.
You can pay back the loan in regular installments over three to ten months.
Spotloan looks at more than your credit score, so you can still apply even if you have bad credit or limited credit history.
Payday Loan Alternative Apps
An installment loan isn’t the only option if you need cash fast but don’t want a payday loan.
Some personal finance apps let you get a paycheck advance to cover immediate financial needs.
The money usually automatically comes out of your account when your next paycheck comes in.
Dave
Dave is a banking app that helps users manage their money.
You won’t be charged for overdrafting your account and don’t have to maintain a minimum balance.
Dave also offers small cash advances with no credit check and no interest.
If you qualify, you can get up to $250 now and repay it on payday automatically.
MoneyLion
MoneyLion is another banking app that offers a range of money management features. T
he RoarMoney account is a checking account that lets you earn rewards for debit card purchases.
Users with regular direct deposits into their accounts could qualify for cash advances up to $250.
The advance has 0% interest and no credit check. MoneyLion will automatically deduct your advance amount from your checking account on the due date.
If you don’t have the funds, they’ll take a partial payment and withdraw smaller amounts each day until your advance is repaid.
Brigit
Brigit is a money management app that helps you get control of your finances.
Brigit offers both a free plan and a monthly paid plan. With the Brigit Plus Plan, you get access to additional features like credit reports and access to credit builder accounts.
You might also qualify for cash advances up to $250. There’s no credit check, no interest, and no fees.
Payday Loan Alternatives for Bad Credit
Building a credit score from scratch or rebuilding bad credit isn’t easy.
Most lenders require you to have good credit for loan approval, meaning you may not get the chance to fix your poor credit.
Luckily there are loan options for payday loan alternatives for bad credit.
Personal Loans for Bad Credit
Some personal installment loan lenders offer bad credit loans.
Possible and the other lenders listed above, for example, all base their decisions on your income and other non-credit factors.
This makes it easier to get access to a loan, which can in turn help improve your credit.
Cash Advance Apps
Banking and cash advance apps give you fast access to money — usually with no credit check.
You also won’t have to worry about repaying your advance, as most apps automatically collect the repayment when your next paycheck comes in.
However, these cash advances usually aren’t reported to credit bureaus and won’t improve your credit score.
Secured Credit Cards
A secured credit card uses a cash deposit as collateral.
This deposit helps the lender guarantee your repayment. After making the deposit, the lender gives you a credit card.
Your credit limit is usually the amount of your deposit. If you can’t pay your balance, your lender uses your deposit to cover the payment.
By making your payments on time, you could improve your credit score.
Credit Union Payday Alternative Loans (PALs)
Some credit unions offer a Payday Alternative Loan to members.
These are personal loans in small dollar amounts that have a monthly payment plan.
Depending on the credit union, you may be able to get up to $2,000 through a payday alternative loan.
Not all credit unions offer PALs and you have to be a member of the credit union to be eligible.
Conclusion
There are lots of reasons to avoid payday loans. And thanks to technology, there are also a lot of payday loan alternatives.
Skip the debt spiral and predatory practices of payday loan lenders and opt for a payday alternative like an installment loan the next time you need cash fast.
And if you're looking to build your credit while covering your expenses before the next payday, consider Possible Finance.
