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A payday loan has its perks and may sound like the perfect solution to your cash problems. However, you should always carefully consider whether you have any other way to settle your payday loan debt to avoid dealing with debt dangers.


Avoid the Payday Debt Trap

Payday lenders can take advantage of consumers in a tight financial spot. Whichever state you live in, getting involved with using payday loans could end up leading you into a debt trap. If you are worried about falling into the payday loan debt trap, you may consider looking at other ways to get funds in an emergency. Here are some alternative options to taking out a payday loan.

Look for interest-free loans

Family or friends may be able to help. Someone who cares about you may want to help you avoid the interest charges and debt dangers that come with a payday loan. You still need to think mindfully about whether you can afford to repay it and reflect on what might happen if you cannot repay the funds. When you borrow from family or a friend, remember that this could damage the relationship if you can’t refund the money.

A pay advance may be an option with your employer. If you have been a reliable employee, your employer may be happy to provide an advance to help you in a one-off emergency.

Many local nonprofits also have programs that offer interest-free emergency credit in cases of emergency. Look online to research community groups in your area. 

If you have a retirement fund, there may be an option to borrow from yourself interest-free. There may still be the risk of fees or penalties for late repayment. However, this would always be a safer option than paying triple-digit interest on a payday loan. 

Seek out lower-cost loans

If you have to borrow from a lending company, try to find types of lenders that charge less than payday loans. Options like home equity lines of credit, which can offer the best possibilities, usually need to be arranged far in advance of when you will need to use them. Alternatively, a credit union may be able to offer you a relatively inexpensive short-term loan. These kinds of loans are sometimes referred to as Payday Alternative Loans (PALs) or Quick Loans.

Credit cards are also a better alternative to payday loans. Despite often charging reasonably high-interest rates, it is still far lower than typical payday rates. Credit card APRs range from around 15-35%.

Finally, some traditional banks offer fairly priced installment loans.  These are generally even more expensive than credit cards but will still cost far less than payday loans.

loan percentages

Sources: 1. Freddie Mac, 2019. 2. U.S. Federal Reserve, 2019. 3. St. Louis Federal Reserve, 2019


You may be able to avoid getting a loan altogether! See if any of the following options could help you out of a financial emergency. 


Ask For More Time

Your landlord may be happy to give you some extra time to pay the rent this month; you’ll never know if you don’t ask! Or, if you in debt to another loan – speak to the creditor. They may agree to set up a repayment plan that you can afford.  

Sell some of your stuff

You can turn your unwanted items into cash by selling them online. According to eBay, nearly six in 10 people admit to owning over 50 unused items stored away, valued at an estimated $500. Using eBay, Craigslist, or Yard sales, are all effective ways to gather some quick cash without getting into debt. If you’re more creative, you may be interested in upcycling old furniture to sell online for a profit!

Build a savings pot

The best method of avoiding the payday debt trap is to have money set aside to cover an emergency financial situation. You can avoid high-interest short-term loans if you have a savings pot put aside in advance to cover any surprises. If there’s a shortfall in your budget or you face an emergency expense, having even a small stash set aside could help you avoid getting involved with loans altogether. To find out more about how to save money, read our guide 5 Small Changes To Help You Save Money.

We all want the security of feeling that we are making a wise financial choice. If you are unsure whether a payday loan is the best option for your situation, read our guide: Is a payday loan right for me?