With a payday loan, you repay the loan in a lump sum by your next payday – usually within two to four weeks after the loan is issued. The lender will typically require you to write a post-dated check for the full amount owed, and they will cash the check on the due date regardless of how much money is in your account. If you can’t afford to repay it, you can https://paydayloanstennessee.com/cities/bolivar/ roll the loan over into a new loan – putting yourself even further into debt.
3. Car Title Loans
Like payday loans, car title loans are short-term loans for relatively small amounts with high interest rates and fees. However, payday loans are unsecured, while car title loans use the title of your vehicle as collateral.
“If you default on a title loan, you are in danger of surrendering your title and car,” cautions Arevalo. “It’s your transportation, your way of getting to your job or doctor’s visits. There is certainly risk involved,” he adds.
4. Cash Advances
If you have an existing credit card, one way to get funds quickly is with a cash advance. With this approach, you use your credit card to take out cash through your bank or at an ATM. You can pay back the cash advance as part of your credit card payment.
However, keep in mind that credit card companies usually charge higher APRs on cash advances than purchases. There is also usually a cash advance fee that is a percentage of the amount used.
“[Credit card cash advances] aren’t my first choice,” says Cole. “But a credit card or cash advance at 25% interest is a lot better than a payday loan at 400%,” she says.
5. Payday Alternative Loans
If you need an emergency loan and want to avoid predatory payday loans or car title loans, you may be able to qualify for a payday alternative loan (PAL).
PALs are offered by some credit unions to give their members an option to get money quickly without turning to payday loans. You can usually borrow between $200 and $1,000 and have up to six months to repay the loan in installments. The maximum interest rate that federal credit unions can charge on PALs is 28%, as mandated by the National Credit Union Administration (NCUA). While that’s still fairly high, it’s significantly lower than the rates you’d get with a payday loan or car title loan.
6. Pawn Shop Loans
At a pawn shop, you can use items as collateral. Anything from gaming systems to jewelry can be used to secure a loan. The pawn shop will give you cash in exchange for the item; if you pay off the loan by its due date, you get the item back. If you don’t, the pawn shop keeps it and can resell it to recoup their money.
The interest rates on pawnshop loans are often lower than you’d find on some other emergency loans. Just keep in mind that you risk losing the item you pawned if you can’t keep up with the payments. “Pawn shops wouldn’t be my first recommendation, but they’re not nearly as bad as car title loans or payday loans,” says Cole. “The thing about a pawn loan is you are never going to get the amount that your item is actually worth. But the pawn industry is very regulated as opposed to some of the other predatory lending,” she says.
How to Choose an Emergency Loan
- Annual percentage rate (APR): An APR is an interest rate that includes all the fees and costs of a lending product. With some forms of emergency loans, such as car title loans and payday loans, APRs can be well into the triple-digits. Interest can accrue rapidly, so you can end up paying three or four times the amount you originally borrowed. Carefully review the loan disclosure to see what the APR is and how it affects your total repayment cost. According to the National Consumer Law Center, 36% is the recommended cap for small loans because it gives you payments that you actually have a chance of being able to pay.