When the reality of debt strikes the average person a sense of desperation is likely to form. This desperation can more often than not lead to irrational short term decisions that do more harm than good in the long term. Payday loan companies are known to pray upon people going through tough times by offering up seemingly life-saving loans.
What many people in crippling debt situations don't realize is that these loans come with ridiculous interest rates that just make things worse in the end. There is always another option than resorting to loan sharks no matter how bleak things may seem. Here are the best low-interest alternatives to succumbing to a payday loan.
There are many sites that allow users to engage in peer to peer lending transactions. This form of lending involves many uses pooling money together to fund someone's loan. Each person lending money can diversify an investment portfolio by putting small amounts of money to a vast array of loan applicants. The applicants get to consolidate their debt and pay back what they owe to each user over time. These websites automate the whole process and make sure all the funds go exactly where they need to be.
Examples of Peer to peer lending sites:
Of course, the interest rate of these loans differs wildly depending on the applicant's credit score. A lower score means a higher rate since lenders take on more risk when lending money to such borrowers. It only makes sense that an investment with more risk would yield a higher payout if all goes according to plan. Those with a low score may want to consider a different option on this list to avoid paying more than they should.
Credit Unions and other sources of money are popping up everywhere these days. Personal loans from such sources can often have much lower interest rates than the payday variety. The rate still depends on the credit score of the applicant ut there are a few tricks to make the APR even lower.
Shopping around for a $500 loan that reduces the interest rate when autopay is enrolled is an excellent way to save lots of money over a long period of time. Since it is vital to never miss a payment anyway, autopay APR reductions are essentially a no brainer. It is also possible to shorten the loan period to decrease the rate even further.
Credit cards with an introductory offer where no interest is charged for the first few months are more common now than ever. Once a card application is accepted. most companies allow the borrower to transfer an existing debt balance directly to the card. While these cards tend to have much smaller credit limits, shaving off a chunk of high-interest debt all at once saves a ton of money in the long term.
It is important to note that these types of cards revoke the 0% interest rate if even a single payment is missed. Staying in good standing on these cards is priority number one.
Sometimes it can be best to call in the experts. There are numerous agencies around the world that specialize in helping those alleviate debt in interesting and creative ways. While they all charge a fee for their services, many of them stay in business by saving their clients more money than they cost them. Research is critical when choosing a counseling service as there exist many scams out there as well. Still, thorough searching can reveal a reputable agency that has a long and positive track record.
Another trick that can work wonders is to call up the creditors that are already collecting payments each month. It is possible to negotiate a different payment plan with them that can make life much easier each month. T
hese companies want to keep their existing customers so they can keep collecting interest. If one of their borrowers switches to another creditor, they lose out on free money in the form of interest. Any smart business will bend over backward to avoid that at all costs.
While many dread to even think about asking, a family member or close friend can be just the lifeline for someone who is struggling with debt. If all other options don't pan out, confiding in someone with a more stable financial situation is still a great strategy. Swallowing some pride will be required for this method ut the results can be astounding. These types of family emergency loans will have the least amount of interest and in some cases none at all. Don't rule this one out just because the conversation may be difficult at first.