6 Alternatives to a Payday Loan

FT Contributor
A person counting out loan money.

A payday loan is a quick and easy loan available to those facing financial hardships who need cash fast. Even though each state has its own payday loan regulations, they all typically serve the same purpose — to provide individuals with short-term, high-cost loans to get them by. 

For some, this is the perfect temporary financial fix. While for others, not so much. Listed below are six alternative emergency loans and financial assistance you can apply/ask for, even with bad credit. 

Table of Contents

1. Personal Loan

A personal loan provides an infusion of cash into your finances. The reasons someone would apply for a personal loan vary, however, people commonly seek one out due to a lack of financial resources. 

To get a personal loan, you will need access to your current credit score. If your credit score is good, you may be eligible for a loan with a low-interest rate. However, if you’re applying for a personal loan with bad credit, you may need to fix your credit score before applying. You can check to see if you’re pre-qualified for a loan without damaging your current credit score by performing a soft credit check

When applying for a personal loan through your bank or credit union, you will want to ensure you have any personal documentation that states your current financial situation and identity. This includes:

  • Proof of address; 
  • Proof of identity;
  • Proof of income.

When walking through the loan process, it is important to be aware of how to detect and avoid personal loan scams — they can potentially deepen your financial hole. 

2. Bad-Credit Loan

While having poor credit doesn’t automatically disqualify you from being able to apply for multiple loans, it can make it difficult. Luckily there are loans available for those who fall under the poor-credit category. 

Bad-credit loans are just as it sounds — loans for those with bad credit. Typically, a bad credit score is 579 or lower. It is possible to open a new line of credit with a bad credit score, but it does come with its difficulties. 

A few examples of easy loans to apply for with bad credit include:

3. Same-Day Loan

Same-day loans are available to those who are in emergency financial situations and need help right away. You can inquire about a same-day loan through a:

  • Auto-title lender;
  • Credit card company;
  • Pawnshop (temporarily purchases your valuables in exchange for cash);
  • Personal loan provider. 

4. 401(k) Hardship Withdrawal

Some situations may be so dire that it leaves you no choice other than to withdraw from your 401(k). Some common reasons that may lead to a 401(k) hardship withdrawal are as follows: 

Just because you are experiencing one of the above scenarios, this doesn’t mean you automatically qualify for 401(k) hardship. You must also provide proof of your hardship. The proof needed will vary with each plan — to find out more you will need to contact the bank in which your 401(k) resides. 

Before borrowing from your 401(k), you must be aware of the potential consequences. These include, but aren’t limited to:

  • Interest rates;
  • Taxes;
  • Short-term, high-cost repayment plans. 

5. Sell/Pawn Unwanted Items

Selling and/or pawning unwanted household items is a great and simple way to earn more money. Start by decluttering your home — as you find items you no longer need, separate them into two categories: pawn and sell. 

There are many platforms available that allow you to sell your unwanted items. For example, you can choose to post them on Facebook Marketplace, Craigslist, and eBay. 

However, it is important to be mindful of the fact that on Facebook Marketplace and Craigslist, you choose the selling price. Whereas the pawnshop only offers what they feel your item is worth. 

Unlike selling things, pawning items you don’t want/need at the moment but aren’t quite yet ready to get rid of is another way to obtain cash fast. This loan option does require you to pay back the loan to help ensure your items are safe. If you fail to comply with the payment plan or miss a payment, your items will be placed on the sale floor. 

This doesn’t affect your credit, but it does deprive you of your personal belongings. 

6. Borrow From Family or Friends

Depending on your situation, reaching out to family and friends may be a last resort. If you’re honest with them and explain why you’re asking for funds, it may allow them to see that you truly require financial assistance. 

We suggest sitting down and talking with the individual who agrees to help you to set up a payment plan. This helps them to see that you are not only serious about paying them back but it holds you accountable as well. 

Handling life’s financial emergencies is never easy. But don’t give up hope just yet. There are plenty of ways to apply/ask for financial relief, no matter your situation. It is up to you to research these options and not be afraid to reach out to those close to you for guidance.

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