Payday loans can be tempting, especially if you are behind on your bills or are drowning in credit card debt. Depending on your state's maximums, a payday loan is typically between $100 to $1000 that you pay back with your next paycheck. However, payday loans can be more damaging than helpful since many have interest rates exceeding 400%.

What Is a Payday Loan?

Payday loans are a short-term borrowing solution where you obtain a high-interest loan based on your credit profile and income. They are also known as check or cash advance loans. The loan amount is usually a portion of your next paycheck. As mentioned, these loans can carry crazy interest rates for short-term borrowing.

Finding Better Alternatives

Some individuals can not afford to pay payday loans off within a couple of weeks. So, they either roll the loan over or take another payday loan out to pay off the first one.

There are alternatives you can try rather than taking out a payday loan. They include:

1. Ask Family or Friends. Ask a family member or friend if they would be willing to make a short-term loan to help you out of a challenging situation. If they agree, you should always put the loan agreement in writing, provide them a time period where you will be able to repay the loan, and offer to pay them a reasonable but friendly interest rate. Writing up an agreement ensures reliability and trust. If they can not help you out financially, perhaps they could help with things like:
   • Sharing meals.
   • Free child care.
   • Other assistance.
2. Sell Valuable Belongings. You can sell valuable items through a yard sale or pawn shop. You can put your belongings up for auction on sites like Craigslist or eBay. Selling belongings for fast cash is a better solution than taking out a payday loan, especially if they are items you do not need.
3. Try a Payday Alternative Loan (PAL). The National Credit Union Administration regulates PALs. It created the program in the year 2010. However, the loans must be:
   • Amounts between $200 and $1,000.
   • Given to people who have been members of the credit union for a minimum of a month.
   • Affordable, with a 28% maximum annual percentage rate and no more than a $20 application fee, reflecting the actual processing cost.
   • Provided to individuals one at a time. People can not receive more than three PALs within six months.
   • Provide no rollovers; they must be repaid entirely after one to six installment months.

   In addition, the NCUA added another PAL option in 2019, better known as PAL II, which is similar to PAL with a few exceptions:

   • The maximum loan increases to $2,000.
   • Terms range from one to 12 months.
   • There is no longer a waiting period; borrowers can acquire PAL II loans once they acquire a membership.
4. Get a Second Source of Income. Acquiring a temporary or additional part-time job might be necessary to cover extra expenses. Today, there are a lot of side gig opportunities, including dog sitting, rideshare driving, and even grocery shopping. If you have substantial debt, you might require more funding than what a short-term payday loan can provide. Ask your family or friends if they can help watch your children so you can get a second job.
5. Seek the Help of a Bank. When you consult with them, many banks often help consumers with pending overdrafts. They might help you work a short-term solution out with reduced fees. But you'll never know until you ask them.

Remember, payday loans, while a standard solution for paying off debt, come at a high cost, and they can be more damaging than they are helpful. So, it is always better to seek alternatives to payday loans whenever possible.