The rising cost of living has brought the cash crunch situation, necessitating the need to borrow loans – short term or long term. After experiencing the financial setback in the Covid-19 pandemic, people have now become conscious to keep emergency funds in place. At such times, payday loans may look like an attractive option for employed people. Payday loans are convenient and easily processed, so they may look attractive to borrowers looking for
short-term loans. However, they are high-cost loans that become due on the borrower’s next salary due date.
What are Payday Loans?
Payday loans are a convenient form of loans for those borrowers who are earning regular salaries. They are unsecured short-term cash loans that are available to salaried individuals for the month till their next salary is due. It is thus a small loan amount that comes normally at a high-interest rate that varies from lender to lender. Thus, it is beneficial for those salaried employees who otherwise have difficulty in managing their expenses for the month and can repay the loan using their next salary. Though payday loans look attractive, the consequences of not repaying the payday loans on time could be huge.
It is better to look for more healthy financial alternatives to borrow money, even for those borrowers with a low credit score.
What are the Alternatives to a Payday?
Borrow from Family/Friends
A good alternative for getting emergency cash is sourcing from close family or friends. At times, such borrowing would even mean getting an interest-free loan. Ensure that you have a proper loan agreement in writing to avoid any conflicts or misunderstandings on the loan terms with your family/friends. Any failure to repay this type of loan may not hurt your credit score, but it could result in strained relationships with your family/friends or legal action.
Go for a low-interest Credit Card
You may be short on cash, but you still try and get a low-interest credit card. This credit card would help you to manage your expenses till your next payday by paying interest at a lower rate as compared to the high-interest payday loans. Check for credit cards whose APR is lower than the APR of a payday loan. Lenders who offer low-interest credit cards may however want a good credit score on the part of the borrower. You can even opt for a balance transfer card to manage funds.
Avail your Overdraft
Go for an overdraft against your bank account. This option could work similarly to getting a credit card. However, you will get more time to repay the overdraft amount than a payday loan, making it a feasible option.
Get a Personal loan
Today in the age of instant loans, getting a personal loan has become very easy provided the borrower fulfils the basic eligibility criteria. Most traditional lenders providing
personal loans look for a good
credit score and a regular source of income/salary. Now, there are many secured online loan platforms like Herofincorp offering
collateral-free instant personal loans at low-interest rates. These
instant online apps provide hassle-free loan documentation, real-time approval process and accept borrowers with a minimum income/salary.
A personal loan is a good option for those looking for alternatives to a payday loan. Herofincorp is one of the user-friendly fully digitized loan app, powered by Hero FinCorp, - the fastest growing NBFC in India. The app provides personal loans which get disbursed within a few hours, making the overall personal loan process seamless and enriching for the borrower.
