Nowadays, our money just never seems to stretch far enough. That’s why an estimated 2 million people use payday loan companies to ensure that they have the money to survive until the end of the month. Payday loans are incredibly simple to acquire and, if you’re desperate for money, they may appear the best option. But, what other options are available, and are payday loans the best option available?
What Do You Need To Know About Payday Loans?
At face value at least, payday loans seem like a very reasonable option if you’re short on cash. Usually available immediately and with no credit check, payday loans will allow you to have money in your bank account within the hour. The lack of a credit check means that payday loans have become an increasingly popular option for people with a poor credit rating.
This easy credit and the immediacy of the service, however, comes at a cost and interest rates can be around 5000% if money is borrowed for a year. When paid back on time, payday loans do not cause a financial problem and can be incredibly useful but, if you’re unable to pay when planned, ‘rollover’ occurs and this means that very quickly the amount can simply become unpayable.
In addition to this, the lack of a credit check can also be problematic. Although it can sometimes obscure your ability to borrow, it ultimately acts in your favour as it ensures that you’re only borrowing a manageable amount. With payday loans, however, this isn’t the case and although this helps in the short term it can cause long term financial issues. So, what other options are available?
The Payday Loan Alternative: Short Term Unsecured Loans
Short term unsecured loans have recently entered the market, providing customers with an alternative to the payday loan. The main difference between the two types of loan is the timespan they are offered on, with companies such as 1st Stop offering 3, 6 and 12 month payday loan options.
Short term unsecured loans provide greater flexibility with payment options, with customers being able to spread the repayment and pay in instalments. This means that short term unsecured loans have become a particularly good option for people who need to borrow a relatively large sum whereas payday loans probably favour people who only want to borrow a small amount that they can repay almost immediately.
Repayment plans are practically the only difference between the two loan types as with unsecured loans you can still apply online and receive the money the same day. This means that if you’re unsure whether you can pay the full amount back on your next payday, short term unsecured loans may be a better option because of the flexibility they provide.