Other Loan Alternatives That You Can Avail Of Aside From Payday Loans
Since a law has been enacted that places a cap on the costs of payday loans, we will delve deeper into other alternatives that people can avail of. Payday loans are truly a very appealing option for most people who are looking for money fast. There are even lenders who guarantee that they can send you £500 within 5 minutes. But, be ready because the loan interest can be very high, some lenders can go to as much as 5,000% in annual interest rates.
Also, there are charges for paying late and a lot of payday lenders collect repayments immediately from your debit card. These CPAs or continuous payment authorities enable lenders to get more payments from your bank or credit card with your express approval.
Here are some alternatives you can check out:
For as long as you are able to repay your charges on your credit card in full every month, it’s guaranteed free of interest. So, this is a great and cheap way for you to borrow money for a short period of time. If you are unable to clear the card, you can always pay the interest. Credit cards, however, are not ideal for cash withdrawals as you will end up paying more than the amount you borrowed. You will find a lot of good credit card offers, there are those that offer up to 12 months with 0% interest rates.
Those who have low income and have no money for emergency cases can get help from the Social Fund. This of course, happens rarely and you have to show proof that you are truly in need. However, extreme cases like calamities or natural disasters could entitle people to qualify for this.
When you need cash assistance you can instead opt for credit unions. Credit unions offer an affordable alternative to payday loans. They are owned and managed by its members. Many credit unions charge super low interest rates. For instance, there are those that offer payday loans with a 27% annual interest rate. One can check how much a credit union loan would cost by using the online calculator at the official website of the Association of British Credit Unions.
The loans from these firms come with no additional fees, no hidden charges, and absolutely no penalty for early repayments of loan.
Those that have a bank account can agree to get an overdraft. Bank overdrafts can be for a fixed amount made on a specific time frame, for instance a £400 loan may be repaid over 6 months, or if you have been provided a set limit on a continuing manner. Hence, you will be charged an interest everyday on the amount you have taken as overdraft. This is basically cheaper than a payday loan. There are even some banks that allow 0% interest on overdrafts for a limited time, which enables borrowers some time to sort out their finances. Remember however, that an unauthorized overdraft can be very expensive, avoid these at all costs or have problems down the road.