Consumers facing debt problems have many alternatives from which to choose. A cash advance is just one example out of many other options, each of which comes with its potential benefits and drawbacks. Review the loan alternatives below before making this important financial decision.
1. Negotiate With Creditors Directly — The best alternative to a cash advance or a short term loan is for consumers to speak directly with creditors to negotiate a settlement of debt. The majority of creditors accept payment plans and other alternative payoff methods when dealing directly with an honest debtor. While this will often lead to a timely payoff or reduction in debt, in most cases, finance charges continue to accrue and the responsibility of paying that debt is not resolved.
2. Secured Credit Cards/Bad Credit Credit Cards — There are some credit cards available that are specially designed for consumers with financial problems or poor credit histories. Consumers often assume they do not qualify for any credit cards without shopping around, and rarely consider the option of a secured credit card, or a credit card tied to a bank account. Often secured credit cards are easily upgradeable upon the completion of 6 months to a year of payments. Unfortunately, secured credit cards often impose very high interest rates. With little regulation, these finance charges can nearly match those of a cash advance. In addition, these cards take time and research to find and are not immediately available.
3. Advances From an Employer — Some employers will offer paycheck advances, which generally result in zero fees or charges, because it is not a loan. This option can lead to the smallest amount of fees and charges, and it can be the fastest option if done correctly. Oftentimes though, employers cannot issue these advances immediately or with short notice. In addition, there are some drawbacks to letting an employer know you are in need of money. Informing management of your financial problems could have adverse effects on employer-employee relationships, create a negative perception of the employee, or even stand in the way of potential salary increases.
4. Credit Unions — Credit unions may offer small, short-term loans to their members. More consumers can join credit unions now that affiliation requirements have become less stringent. Researching, finding, applying and becoming a member of a credit union can unfortunately be a timely process. While the loans offer good rates, they are usually not a good option for emergency situations where time is of the essence.
5. Overdraft Protection — Most banks offer checking accounts with overdraft protection. Cash Advance lenders fees are generally lower than bounced check fees, but a better alternative is to avoid bouncing a check in the first place. However, if you are aware that your account will overdraft, a payday loan is a great way to pay one small fee instead of paying two or more larger ones.
