Those who oppose payday lender often claim that cheaper payday loans alternatives exist. Individuals with good credit have a wide variety of for cheaper unsecured personal loans, but those with credit constraints will likely discover pay day loan to be a better option. USA Today’s recent piece on payday loans no faxing alternatives is an additional sad example of the misinformation that poisons the public view. As we’ll see, their suggestions aren’t necessarily all they’re cracked up to be.
Payday loans alternatives: First try 401(k) loans
With payday loans no faxing alternatives like friendly 401(k) loans, one could wonder why they’d need enemies. True, it is possible to borrow up to $ 50,000 or half of what’s with your 401(k) plan (whichever is the lesser) at an initially low interest rate with no credit check. The Money Alert reports the awful truth: you have to pay it all back before you can continue building your nest egg. If you can deal with the hit to your retirement savings, go for it. You must pay back in full, without the benefit of employer matching.
Here’s something else you’ll lose: take home pay via payroll deduction. Great, but if job loss hits, you’re in trouble. Then you’ll have to pay it all back in 60 days. You’ll face penalties and the potential of having to file in a higher, a lot more expensive tax bracket on your next return. That’ll cost you. Instead, pay day loans could be a a lot more proven inexpensive alternative, as outlined by a recent joint University of Michigan/Federal Reserve study. They’re much more practical for small-scale loans, too.
No. 2: What about credit card cash advances?
USA Today offers this up as one of their pay day alternatives. Credit card cash til payday loan via special blank checks is convenient, but also quite messy. First, credit card cash today APRs are always higher than the APR for standard credit card purchases. Then if you have to use your credit card for a cash loan at an ATM, you can expect to be charged even more. It’s very important to read the fine print as part of your credit card’s terms and conditions before springing for a credit card cash today, suggests Young Money. If you need money and want pay day loan alternatives, try using an installment loans instead. An installment loans for bad credit won’t require that you settle an entire credit card balance before getting to the advance itself.
The skinny on bank and credit union small loans
Here’s where a consumer’s credit history comes into play. USA Today trumpets these low-interest secured loans, but spend little time addressing the reality that most consumers do not qualify. Payday loans, on the other hand, are easier to qualify for and enable some consumers to repair credit. Those with less-than-perfect credit should explore the possibility, something the USA Today apparently neglected within the process of researching their story.
More details on this topic
USA Today
usatoday.com/money/perfi/columnist/block/2010-06-15-yourmoney15_ST_N.htm
The Money Alert
themoneyalert.com/401kloan.html
Young Money
youngmoney.com/credit_basics/040216_01/
