A payday loan is a highly popular means of procuring money for a short period of time. With varying levels of proof required by different loan companies, and the generally small amounts being dealt with, payday loans are seen as a quick, easy way of getting money when you need it. However, the payday loan is not the only solution for short-term cash flow problems. In this article, we will discuss three main alternatives to payday loans: guarantor loans, using a credit card, and borrowing from one’s friends and family.
A guarantor loan is a loan that you can procure with another person acting as your guarantor should you fail to be able to pay the loan. Essentially, you ask someone to be your guarantor. Then, you go to the guarantor loan company together. You both sign the loan agreement. Thus, if you fail to pay the loan, the company will seek out your guarantor for the balance.
The benefits of guarantor loans are that guarantor loan companies will generally accept people that would not be accepted for individual loans due to a bad credit score. On the negative side, you do have to find a guarantor first, which can be a difficult and emotional process. Your relationship with the guarantor could also suffer, should you fail to pay the loan.
Using a Credit Card
The credit card is the backbone of modern consumer lifestyle. A large portion of the economically-active population makes the majority of purchases on a negative balance on their credit card, and only zero out their account when their pay check arrives.
Using a credit card has the benefit that it is simple to do, and obtaining a credit card is not too onerous. The drawbacks of using credit for cash flow is that should you fail to pay your bills after a certain period, the bank may repossess your assets to settle your balance. This could be anything from your nice new jewellery to your house, so be careful.
Borrowing from Friends and Family
The final option is simply to borrow from friends or family. It is a humbling experience to ask those around you to lend you money. On the positive side, they will may be willing to help you out. If they do so, the conditions will generally be less intensive than a loan or a credit card. However, be wary of asking your loved ones for too much money, particularly if you ask them multiple times without paying them back. Such acts could harm your relationships with these people. They could even sue you for the money back if the situation becomes dire.
Cash flow problems are never easy to fix. There are options available to you if you cannot procure a short-term loan. These include guarantor loans, using a credit card, or borrowing from your friends and family. With each option comes its own unique pros and cons. Evaluate your situation, and select the option that is best for you.