How to avoid a payday loan — Free local resources + 11 other alternatives to consider

Consider these options before you borrow a high-cost payday loan.

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Payday loans can be a quick solution when you’re facing an emergency or unable to cover a bill — but they aren’t your only choice. From local resources to credit unions, there are alternatives available when you’re facing short-term financial problems that can help you stay out of long-term debt.

Local resources by state

Select your state from the list below to see local resources that offer free financial services and help with everyday expenses.

Why did we pick these resources?

Each state has a number of nonprofit and government programs dedicated to helping those struggling to make ends meet. We chose these resources based on their mission and dedication to providing financial assistance for food, housing and other everyday expenses. Many also offer cash assistance that can help you budget for regular expenses while giving you some space to save for emergencies. And finally, many also offer education and advice to help you make better financial decisions — which could put you on the path toward financial freedom.

Top 3 reasons for borrowing and their best alternatives

The alternatives on this table are intended for borrowers with fair or bad credit. If you have good or excellent credit, you may want to consider a personal loan or a 0% introductory rate credit card.

For those who don’t have the best credit, these alternatives may come in handy when faced with some of life’s unexpected situations.

ReasonSuggested alternativeWhy it might be better
Emergency expensesPay advance app or credit card cash advanceThese are short-term options that aren’t as risky as a payday loan — but they may have an equally high cost if you don’t read the fine print.
Existing debtDebt consolidation loanA debt consolidation loan could lower your monthly payments by combining two or more outstanding loans into one.
Everyday expensesLook into local resourcesState and county resources are there to help you make ends meet when you’re facing a financial struggle.

11 more alternatives to consider

1. Seek credit counseling

  • Who it’s best for: People who consistently need to borrow, have difficulty budgeting or are on a limited income

A credit counselor, community assistance program or other nonprofit can help you create a budget and a debt repayment plan. Credit counseling can help solve the structural issues that led to your financial problems in the first place. You may even have enough savings right away that you won’t have to rely on a payday loan.

You can find a reputable credit counseling agency with the National Foundation for Credit Counseling.

    2. Ask friends or family for help

    • Who it’s best for: People who have a strong social network and can reliably repay a small loan

    Consider asking your friends or family to help cover short-term financial needs. They may be more than happy to lend a hand, and you likely won’t have to pay interest on the money you borrow. But remember: You may risk your relationship if you frequently ask for help but fail to repay.

      3. Ask your employer

      • Who it’s best for: People who have consistent work hours and a good relationship with their company

      If you’re struggling with your day-to-day expenses, your employer might be willing to help out by advancing part of your pay. Some companies might also have financing programs for their employees, which are typically less costly than a payday loan.

        4. Find quick ways to make extra cash

        • Who it’s best for: People who have free time and are able to commit to a side gig

        If you’re short just a bit of money, you could find a quick gig to collect some cash. Car and house sharing, selling unwanted items and market research are a few ways you can bring in money if you have extra time. The effort may pay off double-time: You won’t have to pay interest on a loan and you could discover a new stream of consistent income.

          5. Negotiate with your creditors

          • Who it’s best for: People who need short-term relief from their current debt

          At the end of the day, your creditors want to get paid and may be willing to work with you if you don’t have enough money to cover a bill. Contact the company and explain that you’re having trouble keeping up with your debt. Your creditor may help you create a repayment plan or extend your due date to ease your financial burden.

            6. Take out a payday alternative loan (PAL)

            • Who it’s best for: People who are already members of a credit union that offers PALs and can wait multiple business days for funds

            Some federal credit unions offer payday alternative loans that run from $200 to $1,000 with APRs capped at 28% by the National Credit Union Administration. It’s not as fast as a payday loan — even if you are already a member, it may take a few days to process your application. But it could be a good option if you think you’ll need a short-term loan in the future.

              7. Get a loan from a local bank or credit union

              • Who it’s best for: People who live near a CDFI and meet the lender’s requirements

              Some local banks and credit unions offer small-dollar loans to all members of the communities they serve. These are often classified as Community Development Financial Institutions (CDFIs), which are nonprofit lenders with the goal financially empowering local communities. However, some might require you to live in a certain area, work in a certain industry or be a member of a particular demographic to qualify for a loan.

                8. Use a pay advance app

                • Who it’s best for: People who have steady employment and predictable income

                Pay advance apps like Earnin are an inexpensive alternative to payday loan. Typically, you can borrow an advance of around $100 or more with minimal fees and no interest. Some request a tip while others charge a monthly fee to access the service instead.

                Your employer might need to participate in the program to qualify or you might need to sign up for membership to be eligible. Some also limit how much you borrow to money you’ve already made during your current pay period.

                  9. Consolidate your debt

                  • Who it’s best for: People with high-interest debt looking to combine payments or get a lower APR

                  If high-interest debt is holding you back from meeting your other financial obligations, you might benefit from a debt consolidation loan. You’ll use the money from a single loan to pay off your outstanding debt from other lenders, then make a single payment each month to the new lender. This reduces the confusion of having multiple payments and may even offer a lower monthly payment while you eliminate your debt.

                    10. Look into a credit card cash advance

                    • Who it’s best for: People who already have a credit card and haven’t maxed out their limit

                    Cash advances aren’t always the best option because of their high APRs, but in a pinch, the fees and terms may be better than what you can find with a payday loan. You’ll have more time to pay back what you owe, making it a much more affordable option.

                    11. Join a lending circle

                    • Who it’s best for: People who have a DTI under 50% and steady income

                    A lending circle can give you access to low-cost, small-dollar loans funded by the pot that both you and your fellow members contribute to each month. Online companies have started offering formal lending circles that you can join with friends and family or complete strangers that can help you build your credit with every on-time repayment.

                    Compare 3 lending circle companies

                    Payday loan alternatives to avoid

                    Not every alternative out there is a good solution. Other short-term loan options tend to come with many of the same risks as a payday loan.

                    • Auto title loans. These may seem like a solid alternative on the surface because lenders often advertise lower rates. But unlike payday loans, you’ll have to use the title of your car to secure the loan. If you can’t repay your loan, you risk having your car repossessed.
                    • Installment loans. While your monthly repayments will be lower with an installment loan, you’ll face even higher costs — sometimes paying double or triple your loan amount in interest alone. While you don’t need to avoid them entirely, you should spend time comparing options to find the best terms.

                    Use caution when borrowing. Only take out a loan for the amount you need and try to pay it back as quickly as possible to avoid extra interest and fees.

                    Bottom line

                    When money is tight, the last thing you need is pressure to use your hard-earned cash to pay for multiple fees. Explore your alternatives first before deciding whether to take out a payday loan.

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                    2 Responses

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                      RoyalSeptember 6, 2017

                      What options for a loan…Income retired expense. Senior City Housing

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