There are cheaper options than payday loans

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When you need cash quick, it can be tempting to turn to payday loans. You know your paycheck is coming, so why not just bet on your future funds a little earlier? Wrong – Payday loans are not your only option when your budget is tight and using a payday loan can devastate your financial goals.

However, the need for quick cash is a real and widespread problem. A CNBC Make It opinion poll found that 40% of 18 to 21 year olds surveyed were heavily considering taking out a payday loan. About 1 in 10 Gen-Zers surveyed are considering a payday loan for college expenses. As someone who would park a mile from my university campus to avoid school parking fees, I understand how difficult it is to deal with college costs. However, there are better options than taking out payday loans.

The problem with payday loans

In short, payday loans offer quick cash at outrageous interest rates. Borrowing $ 500 to help you with emergency expenses until a paycheck arrives seems like an easy plan. Do not be fooled. If this quick loan has an APR of 391% and a two-week loan period, you now owe $ 575.

If you can’t afford to pay $ 575, you can convert your debt into a new loan. The interest burden continues to mount and it can be easy for anyone to get stuck in this diabolical debt trap.

Do you really need to borrow money?

Before you start borrowing money – even money from a trusted family member – you should pause and consider what this loan means for your financial future. Do you really have to risk your financial health in this emergency? For example, if your car’s air conditioning needs repairing, it is not a life and death emergency. Nobody wants to drive in a hot, stuffy car. But for most, those costs can be deferred for a few months while you put money aside to pay for the repairs.

Before you borrow money, check your spending to see what you can cut back on. Try giving up the streaming services and food delivery services for a month or two and put those savings in a savings account. Take stock of your personal belongings and find out what to sell in a weekend. Selling a loved Xbox system isn’t convenient, but it will keep your finances in the green instead of taking out a loan.

Finally, ask if you can pick up extra hours at work or do a few odd jobs in your neighborhood for cash. Again, spending your weekend asking the neighbors to mow their lawn for $ 20 isn’t comfortable, but it’ll be better for your bank account in the long run. Consider borrowing as a last resort when faced with financial distress.

Two better alternatives to payday loans

If you’ve considered all of the options and still need a quick cash loan, we’ve found two better alternatives to a payday loan or topping up your credit card. With all credit and finance apps, spend time researching the terms and conditions and reading through the FAQs before deciding whether a service or business is right for you.

1. Empower

Enable screenshot of website

Enable screenshot of website

Authorize is a money management app that calls itself “budgeting for the people who hate budgeting”. It offers features like:

Many Empower accounts are also eligible for a cash advance of $ 250 with no fees, no interest, and no credit check. While there are no fees for this cash advance, running an Empower account costs $ 8 per month after the free trial month.

Empower’s auto-saving feature can save you $ 50-100 per month without your even realizing it. The app makes saving easy and painless. However, many other banking apps integrate this function at no charge. Alternatively, the use of Empower’s invoice negotiation and subscription management can be cheaper than comparable services, such as Trim, charge.

2. Boro

Screenshot of the Boro website

Screenshot of the Boro website

Boro is a college student money app only. The app lets you set financial goals and track expenses so you don’t get derailed by unexpected expenses. But life happens, and this is where BoroCash can help.

BoroCash allows college students and alumni to borrow up to $ 2,000 for 12 months. Your APR is determined by your creditworthiness, but you can expect a lower interest rate than typical credit card or payday loans. If you only need to borrow cash for a month, you can also use the 0% APR option.

Unlike payday loans, using BoroCash allows college students to build their credit. One app reviewer wrote, “The credit rating goes up to 40 points after the second payment! Great. Thanks Boro! ” However, there is no guarantee that your credit score will improve significantly.

Although BoroCash offers lower interest rates, taking on $ 2,000 at 15.9% for 12 months means you’re paying $ 182 per month for a total of $ 2,176 in repayments. Depending on your creditworthiness, your interest rate could be higher, which would increase your monthly payments and overall repayment costs. BoroCash shows customers exactly what they will pay for before agreeing so you don’t have to worry about getting dragged into hidden fees.

Bottom line

If in doubt, do not borrow. If you are on the fence about borrowing, take the time to research your financial hardship and money options. It is important to set up an emergency fund so as not to feel like you are financially stuck in the future. Slickdeals is full of money saving tips and offers to help you save more and improve your bank account.

Related financial articles

While we work hard on our research, we do not always provide a complete list of all the offers available from credit card companies and banks. As offers can change, we cannot guarantee that our information is always up to date. Therefore, we encourage you to review all terms and conditions of each financial product before applying.

About Stephanie McGehee

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