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Money plays a very important role in life and people go sometimes too far to get it. Welcome to my wall! I hope by the time you go through it, you will be able to understand what payday loan is and make a wise decision if you ever need to use it.

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This website was great because it was Canadian.

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When people need short-term solutions in order to deal with their daily expenses, payday loans are the first option that comes to mind. That's because the lenders that offer such financial services are ready to provide the sum of money you need in a couple of hours, making it possible to deal with the financial emergency that you have just discovered even the actual day of the discovery. This is definitely a huge advantage, especially when you are trying to make sure your bank account will survive to see another day.

There are actually quite a few pros associated with these payday loans in Canada. First of all, the process of getting such a loan is pretty simple. You're just supposed to find a lender that seems most trustworthy, deal with the paperwork involved and then take the money offered so that you can deal with your emergency. Also a benefit is the complete privacy involved. You will be given the money you are after without having to answer any questions regarding the purpose for which you need the money, for instance. Not even a credit check is performed. As you very well know, every time you apply for a loan, the lender wants to make sure you will be able to cover it, so your credit report is carefully examined. All you will need to bring with you in order to instantly get the small loan you are after is a bank statement, the most recent paycheck stub that you can provide and a check that uses as date the day when the term you agreed upon expires and as value the money you decided to borrow plus the fee involved.

On the same list of pros I must also include the fast approval process because once you are able to provide all the documents mentioned you will get the money you are after in as little as 15 minutes. That's definitely faster than any traditional bank loan. Not to mention that no collateral needs to be involved. To make sure that you will repay the loan, the lender ask from you only a post-dated check which is not that bad, especially if you are sure the account will have the money necessary when the term expires. There's also convenience involved because such lenders offer their services through physical stores all over the country as well as online.

Let's now take a look at the list of cons which has its fair share of entries. First on the list are the fees that you will have to cover. If you can repay the loan on time the fees can be considered ok but once you miss a deadline they are likely to become overwhelming. Not to mention that overdraft fees will get involved every time the lender tries to cash in the check and not enough money are available. Besides, these high fees you are also likely to deal with questionable contracts because lenders will do whatever they can in order to put themselves in advantage. What you must also understand is that such loans are just a temporary solution.

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When people need short-term solutions in order to deal with their daily expenses, payday loans are the first option that comes to mind. That's because the lenders that offer such financial services are ready to provide the sum of money you need in a couple of hours, making it possible to deal with the financial emergency that you have just discovered even the actual day of the discovery.

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This website covered pretty much all the topics I was looking for.

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All of us are in a tight financial spot some time in our lives. Most people are able to go to family or friends to help out but what are your options if they are not able or willing to help? A payday loan could be your answer if the situation is really bad. Most people don't know what a payday loan is or what the pros and cons of payday loans are. Below we shed some light on this topic in order for you to make an informed decision.

What Is a Payday Loan?

Payday loans are loans used to get quick cash on demand if you are in a tight spot and urgently need additional finances. The idea of a payday loan is to be an advance on your next paycheck so your next paycheck will be used to pay off the payday loan.

Payday loans aren't used to finance big expenses like cars or houses and the size of your paycheck will determine the amount of the loan you will be eligible for.

Generally, interest rates for payday loans are higher than other loans due to the fact that these loans are high risk to the lenders. The repayment of the loan depends on only one payment (when you get your next paycheck).

How Do Payday Loans Work?

It is very important to understand how payday loans work before you choose to apply for one. As explained above, this loan is essentially a cash advance against your next paycheck. The lender will provide you with an amount of cash and the amount usually ranges between $700 and $1000. The lender will require full payment of the loan within a short time frame.

On top of the short repayment term, payday loans have very high interest rates and come with high penalties if you miss the repayment date.

Some lenders also require collateral in the form of a pre-authorized check as collateral.

Who Uses These Types of Loans?

Payday loans should only be used if you are urgently in need of additional cash. These loans come with big costs and penalties, so payday loans should never be used for luxury expenses.

Usually, when people experience a cash shortage or need cash for an emergency, they borrow from family or friends. But friends and family don't always have the extra cash to lend us or we don't want to take the risk of potentially damaging the relationship. If this is the case, you can opt for a payday loan.

Let's take a look at what the pros and cons of payday loans are.

What Are the Benefits?

Even though there are certain risks involved in payday loans, there are also great benefits of payday loans.

Easy Application and Instant Money

Applications for payday loans usually take only 30 minutes maximum and if you apply online it might even be simpler and shorter. The application process isn't complicated and also doesn't necessarily require a lot of paperwork. The fact that loan applications can be processed online means you can apply at any time of the day and don't need to wait till the bank opens tomorrow morning before you'll know if you get the money.

Once your loan has been approved, the money is usually also available within 24 hours. This means you will have the money when you need it and don't need to run around to make other arrangements while the bank processes your loan application.

No Credit Checks

Most payday loans don't require a credit check before approval. This is a huge plus point for those people whose credit history would normally preclude them from getting a loan. Your ability to pay the loan is based on your most recent pay stub.

What Are the Negatives?

Payday loans can be a saving grace if you are in a financial emergency. There are, however, some negatives of payday loans that you have to be aware of.

High Interest Rates and Costs

Due to the short-term nature of payday loans and the fact that many of them are unsecured, they come with high interest rates. These rates are much higher than you would normally get on other short-term loans or overdraft facilities. The high interest rate makes the overall repayment quite big so there is a risk that you might end up not being able to repay your payday loan.

Fees and Penalties

As already mentioned, most payday loans come with a large penalty if you miss the repayment date. This might not seem out of place as most lenders charge this for most types of loans. History has, however, shown that payday loan repayments are missed more easily due to the fact that everything needs to be paid back in one large lump sum. If you end up not paying in time these penalties add up and you will end up paying a lot more than you originally expected.

Tight Terms and Conditions

Make sure you read the terms of your loan before just applying and accepting. Most payday loans come with terms that are one-sided and favorable to the lender. Especially if you default.

Should I Apply for a Payday Loan?

If you need money instantly and your friends and family can't help out, you should consider applying for a payday loan. If you are sure you understand the benefits of payday loans and negatives of payday loans you can safely consider this option. Remember, you should never apply for a payday loan for luxury expenses.
Which types of expenses should you use your payday loan for?

Home needs: if your fridge, oven, bed or microwave just broke and you don't have the cash to replace it, you can use a payday loan.

Health emergencies: if you have a medical emergency and your medical coverage isn't sufficient to pay then a payday loan might be the answer!

Cash flow assistance: if you have an out-of-the-norm need that you can't postpone till next month and you are 100% sure you'll be able to honor your debt commitment, consider using a payday loan to cover the cash flow shortage.

Solutions Other than Payday Loans

Make sure you consider all your other options before you take out a payday loan. Consider using a personal loan or credit card. The interest and charges on personal loans and credit cards are much lower than payday loans.

Personal Loans for Immigrants!
Check Loan Options
If your family and friends are an option, don't discount them. It might be a little embarrassing having to ask them to help out with cash, but the terms are likely to be more advantageous than payday loans and the consequences of non-payment much less severe.

Conclusion

Before you take out a payday loan, make sure that you have gone through your other options. If there are no other options, then a payday loan might be the right solution for you. Make sure you understand the pros and cons of payday loans before applying and take specific note of the repayment date and repayment amount. Where possible, you will want to avoid any late payment penalties or additional charges.

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A payday loan could be your answer if the situation is really bad, but most people don't know what a payday loan is or what the pros and cons of payday loans are. Click the link to learn everything you need to know about payday loans!

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Real life stories of how people can get trapped in the cycle of debt

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Payday Borrowers: Trapped in a Cycle of Debt

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People are misinformed and end up paying a huge amount of money on top of what was borrowed

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Are Easy Financial's installment loans a good deal? (CBC Marketplace)

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This talks about the negative effects of payday loan and how they contribute to bankruptsy.

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The 'overwhelming burden' of the payday loan cycle

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It talks about all the positive things of getting a payday loan

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This website was my favourite because not only it talked about the dangers of payday loan but gave alternatives.

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When you need cash quickly, you may consider payday loans as a source of short-term financing. Payday loans are easy to get and don't require any sort of credit check, making them more accessible than a personal loan or even a credit card cash advance. But, are they really a good idea?

A payday loan is essentially an advance against your next paycheck. You give the payday lender your pay stub as proof of income and tell them how much you want to borrow. They give you a loan for that amount, which you're expected to repay when you receive your paycheck, along with the payday lender's fee.

The repayment period is based on how frequently you get paid, i.e. weekly, biweekly or monthly. In addition to proof of employment and a pay stub, you'll also need a bank statement or your bank account information to apply. Payday loans are typically deposited right into your bank account once you're approved, so you get instant access to the money.

Depending on how the payday lender processes loans, you may have to write a post-dated check for the amount of the loan, plus any fees. Some states require the check to be dated for the day the borrower receives the money. In this case, you may have to sign a contract stating the check will be held by the lender until the agreed date of repayment.

On the date the loan comes due, you're obligated to repay the loan, in addition to any fees the payday lender charges. If you can't repay the loan in full, you could ask the payday lender to extend the loan or roll it into a new loan, which usually means paying another fee.

If you default on a payday loan, the potential consequences are similar to defaulting on a credit card or another unsecured debt. Failure to repay can result in the lender threatening criminal prosecution or check fraud. Not to mention, you could suffer credit score damage if the debt is sent to a collection agency.

Payday loans are convenient but that convenience comes at a cost. Finance charges can range from 15% to 30% of the amount being borrowed, which can easily make the effective annual percentage rate (APR) on the loan in the triple-digit range.

Even if you only have the loan for a few weeks, you're likely to pay much more in interest with a payday loan than you would for a personal loan or even a credit card cash advance. Payday loans are often problematic for the people who use them because they tend to be favored by borrowers who may not have cash or other financing options readily available.

One of the biggest pitfalls that can happen with payday loans is when a borrower falls into a cycle of repeatedly extending their loan. They find themselves unable to repay the loan on payday, so they extend the loan for another pay period. They continue spending borrowed money and in the meantime, the fees continue piling up. It's a vicious cycle and it's one that can continue indefinitely since there is no limit on how many times a person can get this type of loan.

The best thing you can do to avoid having to rely on payday loans is to create a budget for covering your expenses. Cut out as many unnecessary expenses as possible and focus on adding money into an emergency savings fund that you can tap when cash is short. Even the loose change found around the house can be put into savings and grow with interest over time.

Building savings takes time, however, and if an unexpected expense pops up there are other ways to handle it, beyond payday loans. For example, you may be able to cut out the middleman by simply asking your employer for an advance against your paycheck. Your employer may offer this in emergency situations, without charging the fees associated with payday loans. But, it's not something you want to make a habit of doing.

You should understand that there are other loan options available to you-known as Payday Alternative Loans (PALs)- even if you have bad credit. These alternative financing methods include online sources and those in your local community. A payday loan should be your last resort.

You could also consider a pawnshop loan. If you have jewelry, tools, electronics or other items of value, you can use that as collateral for a short-term pawn shop loan. You get cash for your item and you can still come back and repay the loan and get your item back, within a set time frame. The downside is that if you don't repay the loan, the pawnshop keeps your collateral. But, this is often a better alternative than getting an unsecured payday loan and being hit with exorbitant fees that lead to a dangerous debt spiral.

While not ideal, credit card advances can also be an alternative to a payday loan. Ideally, you'd have an emergency fund set up to cover a financial crisis, but a credit card will work in a pinch. Also, instead of paying 300% APR on a payday loan you may a 25-29% APR on the credit card cash advance loan.

Finally, asking friends or family for a loan to help get through a hard time is another possibility. Most people have relatives or friends who will loan them the money needed to help with unforeseen expenses or emergencies. Little to no interest is usually added to these loans and arrangements can sometimes be made to pay the loan back in installments over time.

Just remember to be clear with the person you're borrowing from about how and when the loan will be repaid. Borrowing money from friends or family members can ruin relationships if not handled appropriately so make sure to set realistic expectations at the start.

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Do You Know the Most Dangerous Kind of Loan?

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When you need cash quickly, you may consider payday loans as a source of short-term financing. Payday loans are easy to get and don't require any sort of credit check, making them more accessible than a personal loan or even a credit card cash advance. But, are they really a good idea?

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They are very expensive as the interest rate is very high

Considered predatory as they can sometimes be misleading

Easy to get trapped in a debt cycle

They target low income communities

They don't help build your credit

They will have access to your bank account

They can sue if the person doesn't pay back

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No credit check for people with bad or no credit

Fast - The money can be in your account in as little as 15 minutes

Easy - Not too many documentation is required

Privacy - No need to disclose reason for borrowing

No collateral needed

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Emergencies do happen and this is a fact of life. After going through the pros and cons of payday loans, you can see that cons do outweigh the pros. There are many alternatives available such as budgeting, pawnshop loan, credit card, or even asking a family member or friend. Borrowing in general is not a good thing, but if needed, I hope that my research was sufficient to help you make a wise decision.

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I liked this website because it was easy to read and understand

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By Lauren Bringle Jackson, AFC®
While advocates of payday loans say they grant loan access to people with poor or no credit, critics say these "short term" loans unfairly target minority populations and trap people into lengthy debt cycles.

What is the truth? Here's a breakdown to help you figure things out for yourself. In this article, we'll explore what a payday loan is and how it works, differences from state to state, some pros and cons of payday loans, and some responsible alternatives to payday lending.

Table of Contents

But first ...

What is a payday loan and how does it work?

A typical payday loan is a small-dollar loan (usually about $100-$1,500) with a two-week term that is due in a single lump payment on your next payday. At least, that's how it works in theory.

If the term "payday loan" doesn't ring a bell, here are some other names for it:

Cash advance

Short-term loan

Payday advance loan

Fast cash or fast loan

Bad credit loan

Deferred deposit transaction

Paycheck advance

According to the Consumer Financial Protection Bureau (CFPB):

"To repay the loan, you generally write a post-dated check for the full balance, including fees, or you provide the lender with authorization to electronically debit the funds from your bank, credit union, or prepaid card account. If you don't repay the loan on or before the due date, the lender can cash the check or electronically withdraw money from your account."

These loans target people with poor or no credit, or little financial literacy, who need access to cash immediately. But if you have bad credit or no credit, what other options do you have to access fast cash in an emergency?

We'll explore some responsible alternatives to payday loans at the end of this piece, but first let's break down the pros and cons of payday loans.

The pros of payday loans

Here's why some people turn to payday loans, despite the often negative consequences:

Pro 1: They're easy to access

The number one advantage of payday loans is that they're easy to access. In fact, many cash advance lenders promise access to cash within 24 hours and an immediate lending decision. Some are even available 24 hours a day, 7 days a week and have online applications.

Unlike traditional loans, which can take time to apply for, these loan applications can take as little as five minutes.

Pro 2: They have fewer requirements than other loans

Traditional lenders usually require a Social Security number, photo ID, proof of income, a credit check and will verify your ability to repay a loan. Unlike traditional personal loans, most "fast cash" loans have fewer requirements to apply.

Generally, all you need to apply for a payday loan is to:

Be at least 18 years of age

Have a government-issued ID or Social Security number

Have a regular job or other regular source of income

Have an active bank account

While having fewer requirements makes getting cash more convenient, keep in mind that the additional requirements from banks and other lenders were often put in place to help protect you.

Pro 3: They don't check your credit

Unlike traditional loans where you need good credit to be approved, payday loans don't require a credit history. Since they don't pull your credit, that also means no hard credit inquiry, which can lower your credit score by several points.

Except in rare cases, however, payday loans won't help build the credit you need to move onto higher quality financial products in the future.
Learn how to build credit by reading our post on "How to Build (or Rebuild) Credit."
Pro 4: It's an unsecured loan

Unlike a car title loan, traditional auto loan or mortgage, payday loans are not secured by personal property. This means that if you default (don't pay), the lender can't seize your property as a consequence.

While not secured, payday lenders often have access to your bank account as a condition of the loan, which is a different type of risk. They can also take other measures, such as sending your debt to collections or taking you to court over outstanding balances.

The cons of payday loans

When it comes to payday loans, the Federal Trade Commission, a government regulatory body focused on preventing fraudulent, deceptive and unfair business practices, states:

"The bottom line on payday loans: Try to find an alternative. If you must use one, try to limit the amount. Borrow only as much as you can afford to pay with your next paycheck - and still have enough to make it to next payday."

Which brings us to the first disadvantage of payday loans. ...

Con 1: They're expensive

Depending on the state, payday loans have high interest rates that average about 400%. For comparison, many personal loans charge about 4%-36% interest, while credit card interest ranges from about 12-30%.

This image shows just how high these rates can go, depending on where you live.

Source

To break this down into a more concrete example, here's what a payday loan of $500 could cost you in a few different cities across the US as of July 2019:

Looking at this city sample, it could cost $55-$102.27 to borrow a total of $500.

In contrast, if you had a $500 loan with a 30% APR, you would only pay an extra $25.12 in interest for a three-month term, making the total cost of the loan $525.12.

Here's how much that lower interest rate would save you in each of the cities above:

Following this example, you could save anywhere from $30-$77+ for every $500 you borrow if you use a traditional loan instead.

Notice also, with the 30% interest loans, you have a longer time period to pay back less money.

However, many traditional lenders require a minimum credit score to qualify. And the better your credit, the more money you could save over time.

Payday loans are sometimes harder to pay back than a traditional loan, because the lender did not verify your ability to repay before lending you money. Payday lenders don't generally assess your debt-to-income ratio or take your other debts into account before giving you a loan either.

Con 2: Payday loans are considered predatory

A predatory loan is defined as having unfair, misleading or unaffordable terms and has the potential to trap users in a cycle of debt. Payday loans are viewed as a type of predatory loan because of the high costs that can escalate quickly.
Some warning signs of predatory loans include:

1. The lender doesn't check whether you'll be able to repay the loan. If you can't repay the loan, you could be forced to roll the loan over repeatedly, accumulating new fees each time.

2. The loan doesn't help you build credit. If the loan provider doesn't report to any of the three major credit bureaus (Experian, Equifax or TransUnion), this could be a warning sign. If you're unsure whether or not a loan reports to the credit bureaus, ask.

Con 3: It's easy to get trapped in a debt cycle

Each time you extend (rollover) a loan, a payday lender charges additional fees, increasing your out-of-pocket costs for borrowing the money.

In fact, nearly 1 in 4 payday loans are borrowed more than 9 times.

Rolling the loan over can significantly increase the amount of time it takes to repay the loan, sometimes adding months or years to the original two week terms.

Con 4: They target low-income, minority communities

According to a 2016 report by the Center for Responsible Lending, payday lenders are mostly located in minority communities. In fact, the report found, there are about 8.1 payday loan stores per 100,000 people in African American and Latino communities, while mostly white neighborhoods only had about 4 for every 100,000 people.

That means there are twice as many payday lenders in communities of color as there are in white communities.

According to Keith Corbett, Executive Vice President of the Center for Responsible Lending, payday lending in communities of color is comparable to Jim Crow laws. In an NPR interview Corbett states that in the Jim Crow era, everyone said it was a free market, so it was "okay" for people of a certain color to have to ride in the back of the bus.

"The argument to place these fringe financial services in our community is pretty much the same. And think about it. If you are in a low-income community and the only place you see for financial transactions is a payday lender or a rent-to-own shop, it becomes a normal situation."

He continues by calling out the financial disparity between white communities and communities of color, citing the large gap in interest rates as a possible cause:

"And so what happens is if one community is paying no more than 15% to borrow money and the other community is paying 300-400% minimum, the community will never get out of poverty," Corbett states.

Con 5: They have access to your bank account

To gain access to a fast cash advance, borrowers are often required to grant the lender access to their bank account. While setting up direct deposit to make bill and loan payments is pretty common now, this account access works a little differently.

"Some payday lenders attempt to recover their money by taking what they're owed directly from borrowers' checking accounts, which borrowers grant access to as a condition of the loan. But unexpected withdrawals from the lender can rack up pricey overdraft fees and damage credit scores," CNBC reports.

Many payday lenders have you write a postdated check - meaning in this case, a check that is dated to be cashed after your next payday - when you get the loan. If you don't have enough money in your account when they cash the check, you could face expensive overdraft fees and bounced check fees (also known as insufficient funds) from your bank as well as returned or failed payment fees from the lender.

These extra fees add to the already high costs charged by payday lenders. If you find yourself in this situation, contact your bank immediately to discuss your options for protecting your account.

Con 6: Payday lenders can sue you for the money you owe

Just like other lenders, if you fail to pay a payday lender for long enough, they can take you to court and try to get a judgment against you for failure to repay a debt. If a judgment is ordered, you could face wage garnishment, imprisonment or other consequences.

Keep in mind, however, that legal battles are expensive. In the case of small-dollar loans, it's not always worth the time and money involved for the lender to sue. However, some companies or debt collectors will threaten to sue or threaten wage garnishment to scare you into paying them back quickly.

If you receive these threats, consider getting help from a local nonprofit organization focused on debt management, an Accredited Financial Counselor or a Certified Credit Counselor who could help you with your unique needs.

Con 7: They don't help you build credit

Last but not least, payday loans do not help you build credit because they do not generally report to the credit bureaus.

Some versions of payday loans in some states allow you to work your way up to lower interest loans that can be paid in installments and that report to the credit bureaus. However, this option is rare and little information is available on how long it takes, or how many unreported loans at high interest rates are required before you're able to build credit with their loan.

Similar to medical debt, payday loans usually only report your debt to the credit bureaus if it gets sent to collections. So while payday loans can't help you build credit, they could hurt your credit if you're not careful.

If you build good credit, you could qualify for higher quality financial products, including personal loans and credit cards with lower interest rates.
To learn how to start building credit, check out our blog post "How to Build (or Rebuild) Credit."
Ultimately, it's important to remember:

Payday lending varies by state

Some states prohibit payday lending as of spring 2019, including:

The District of Columbia also prohibits payday lending.

However, according to the National Conference of State Legislatures, 37 states have specific statutes that allow for payday lending. Other states do not have specific payday lending provisions or require lenders to comply with interest rate caps on other consumer loans.

These states include:

Each state has different regulations that govern the maximum interest rate (if any) cash advance loans can charge, as well as the maximum loan amount, loan terms and finance charges allowed. In 2019, there are also several pending pieces of legislation concerning payday loans.

Here's a closer breakdown of the states that do allow payday loans:

Colorado

$500

No maximum. 6 months minimum.

Can't exceed 36% APR. See here for additional regulations concerning origination fee, interest rates & monthly maintenance fees.

Florida

$500 for single payment loans, not including fees

31 days maximum (7 days minimum)

Fees can't exceed 10% of the original cash advance.

Fees can't exceed 8% outstanding transaction balance on biweekly basis.

Additional verification fees may also be charged.

Prepayment penalties prohibited.

Michigan

$600

31 days maximum

Service fee can't exceed:

15% of first $100 cash advance.

14% of second $100 of cash advance.

13% of third $100 of cash advance.

12% of fourth $100 of cash advance.

11% of fifth or sixth $100 of cash advance

Minnesota

$350

30 days maximum

Up to $50: can't exceed $5.50.

$50-$100: can charge 10% of loan proceeds + $5 administrative fee.

$100-$250: 7% of loan proceeds with minimum of $10 + $5 administrative fee.

$250-$350: 6% of loan proceeds with minimum of $17.50 + $5 administrative fee.

Additional rules apply for after loan maturity.

Ohio

$1,000

12 months maximum (91 days minimum). Minimum may be less if total monthly payment does not exceed 6% of borrower's monthly gross income.

Interest can't exceed 28% per year.

May charge monthly maintenance fee that doesn't exceed 10% of original loan amount or $30.

If original loan amount is greater than $500, may charge 2% of original loan amount.

Can charge up to $20 for returned or dishonored payment.

Can charge check cashing fee, not to exceed $10.

Damages, costs and other disbursements, may not exceed original loan amount.Fees and charges can't exceed 60% of original loan amount.

Rhode Island

$500

13 days minimum

Can't charge check- cashing fees that exceed 3% amount of advance or $5, whichever is greater, if check is payment from state public assistance or federal social security benefit.

Can't charge check-cashing fees for personal checks that exceed 10% of original loan or $5, whichever is greater.

Can't charge check-cashing fees that exceed 5% of original loan or $5, whichever is greater, for all other checks.

Can't exceed 10% of amount advanced in transaction fees.

Texas

Varies

For a loan of $100 or less, 1 month for each multiple of $10 cash advance or 6 months, whichever is less. For a loan of $100+, 1 month for each multiple of $20 of cash advance.

Varies widely depending on loan type and amount.

$0-$30: Acquisition charge can't exceed $1 for every $5 of cash advance.

$30-$100: Acquisition charge can't exceed one-tenth of cash advance amount. Acquisition fees are separate from interest.

This chart is current as of August 2019. For proposed bills and the most recent updates to these fees and regulations, click here.

To download a PDF version of this table, click here.

Responsible alternatives to payday loans

To avoid predatory loans such as payday and auto title loans, there are basically two tracks you can take:

1. The "I need money now" alternatives to predatory loans.

2. The proactive approach to avoid predatory loans in the future.

Let's take a closer look at each.

Payday loan alternatives if you need money sooner rather than later

1 - Review your bills and talk to the people you owe

Before taking out emergency cash to cover a bill, first look at any payment due dates, then at the dates when late fees start to accrue. Consider other consequences of late payments, and try to prioritize what you owe.

For example, many traditional lenders have a 15-day grace period before they charge a late fee. If you just need to wait for your next paycheck, would paying one bill a few days late (but before you get charged a late fee) keep you from having to borrow money to make ends meet?

If you're experiencing a financial hardship, try talking to your landlord, your utility company, your lender or whoever you owe money to and see if they'll work with you. It doesn't always work, but sometimes it does, so it's worth a try. Just give them a call and ask.

In certain cases, you might qualify for student loan forbearance or deferment, or consider bankruptcy as an alternative. If you're considering these options, try to connect with a nonprofit organization that could help you manage debt, or with an Accredited Financial Counselor or other reputable professional to get the help and advice you need.

2 - Get a loan from Mission Asset Fund

Mission Asset Fund (MAF) is a San Francisco-based nonprofit organization that provides 0% interest loans through lending circles to people in need across the country. Not only are these loans 0% interest, MAF also reports your payments to the three major credit reporting agencies.

There is a small caveat though. MAF requires you to take a few short financial literacy courses prior to qualifying for a loan. But if taking those courses could save you 400% on interest over a payday loan, isn't the extra time worth the wait?

3 - Get a Payday Loan Alternative from a Federal Credit Union

Payday Loan Alternatives (PALs) are small-dollar loans that range from $200-$1,000, with loan terms ranging from 1-6 months. Many credit unions also offer financial counseling at no additional cost to their members.

The catch with this type of loan is you often have to be a member of the credit union for at least one month before taking out this loan. To gain access to a PAL, talk to your local credit union.

4 - Get a cosigner on a traditional personal loan

While you might not qualify for a loan on your own if you have poor or no credit history, with a cosigner, you could gain access to a personal loan with better interest rates and build your own credit history while you're at it.

A cosigner is someone you have a close relationship with - like a parent or spouse - who agrees to take full legal and financial responsibility to pay your debt if you can't or don't. Ideally, a cosigner should be someone who has great credit.

Just remember, if you don't pay back the loan, you would not only put the financial burden on your cosigner, you could also damage their credit. (See more about how co-signers affect your credit.) So if you go this route, make sure you will be able to pay off the loan as agreed.

Proactive strategies to help avoid payday loans in future

Since emergencies can happen at any time, the best approach is to prepare as much in advance as you can. That way, if you do experience financial hardship, such as job loss, medical bills, unexpected car repairs, etc., you'll be able to either borrow the money through a high quality loan product or credit card, or have the money saved to cover what you need.

Here are some strategies you can start today to help avoid predatory loans in the future.

1 - Plan ahead for emergencies

Make sure part of your future financial plan is to save money for emergencies. Some personal finance experts recommend you set aside 3-6 months' worth of living expenses in an emergency fund. This fund should be a savings account you use only during emergencies, but can access quickly when you need it.

While 3-6 months' worth of living expenses can sound like an overwhelming amount to try and save if you live on a tight budget, remember that every little bit you set aside helps. For example, if you saved just $5 a week for a full year, by the end of the year you would have over $240. And that's before you add the interest your money earns in a savings account.

Unlike with money in a checking account, which sometimes charges fees, a savings account can help grow your money by earning interest. The interest on a savings account is known as the Annual Percentage Yield (APY). Be careful not to confuse APY with Annual Percentage Rate (APR) which is the amount of money you get charged for using a financial product.

Many online banks now offer pretty high APYs - at least compared to the national average - and don't require a minimum deposit to open a savings account. So you can start a savings account with just a few dollars.

For example, some banks, like Ally, offer an APY of over 2%, while some larger national banks like Bank of America offer closer to 0.03% as of spring 2019. When you get a savings account with a higher APY, you can grow the money you do have in your savings faster.

2 - Build your credit so you can qualify for higher-quality financial products

Aside from potentially trapping you in a debt cycle, many payday loans (most?) don't help you build credit even if you pay them off, since they do not report your payment history to the credit bureaus.

To gain access to more traditional loan products or credit cards with more competitive interest rates, it's important to build positive payment history that proves to lenders you can pay back what you owe on time and as agreed.

Final thoughts

When you're pinched for cash, it can be tempting to fill out a five-minute application to get the money you need through a payday loan. But the quickest way isn't always the best way, and you could end up paying for that single "payday" loan for years to come. So before visiting the closest cash advance store, be sure to take some time to look over your other options first.

About the author

Lauren Bringle Jackson is an Accredited Financial Counselor® and Content Marketing Manager for Self Financial - a financial technology company with a mission to help people build credit and savings.

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Self - The Pros & Cons of Payday Loans - Self.

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By Lauren Bringle Jackson, AFC® While advocates of payday loans say they grant loan access to people with poor or no credit, critics say these "short term" loans unfairly target minority populations and trap people into lengthy debt cycles. What is the truth? Here's a breakdown to help you figure things out for yourself.

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Payday loan or cash money  is a small amount loan that is typically due in a week ,two, or a month depending on when the borrower gets paid. This is supposed to help until he/she receives their paycheck. The repayment is usually done by providing a postdated cheque in the amount that was borrowed plus interest and fees or give them permission to debit the bank account at a specific date.