Payday loans are appealing when the unexpected happens. Your dog requires emergency surgery, and now you have an $1,100 bill. You are going to be late with your mortgage because your daughter had to see the doctor. Receiving a payday loan, which is so easy and quick to do, can seem like the perfect solution to your monetary problems. However, before you do, remember that once you miss a repayment, the average interest rate on a payday loan snowballs up to 391%. If that number makes you pause, then you’ll be glad to know that you have a lot of viable options for securing funds. A trip to the payday lender does not have to be one of them.

Personal Loans

You’re probably already familiar with the personal loans issued by banks, but you can also receive them from credit unions, consumer finance companies, and online lenders. Borrowers receive them for everything from car purchases to home improvements. They are typically known as installment loans, meaning you’ll make fixed payments each month for usually up to 84 months. The interest rate charged will be determined by the lender, who will usually look at your credit report to see your payment history as well as any other debts you might have.

Borrowing From Retirement Accounts

Borrowing from your 401K can be useful, though it comes with disadvantages. The IRS requires that you repay the money within five years, but if you will use the money to buy your main home, you’ll have additional time to repay it.

You can also only borrow against the 401K plan for the company you currently work for, not an old 401K. You can also only borrow a maximum of $50,000 or 50% of your 401K account, whichever is less.

Payroll Advance

This is exactly what it sounds like. Your employer agrees to give you an advance on your future paycheck, basically a short-term loan. You pay it back by having your employer deduct the repayment amount from future paychecks. One advantage is that your credit score normally doesn’t figure into this – all employees generally receive the same rates and terms.

Credit Card Cash

While using a credit card to pay for a bill is not recommended because it will just create more debt, it is an option that can be better than going to a payday lender. Your credit or credit score will not be directly impacted by taking out a cash advance. You may, however, be faced with a high interest rate on the cash advance, and if you are unable to pay it back, that can lower your credit score.

Borrow From Friends or Family

Friends or family may be a great option for you if you need money. One reason is that any loan they issue you won’t be noted on your credit report. It’s highly recommended, though, that you keep it professional. Type up the terms of the loan, including the interest rate and the length of the loan. That way, both of you will be able to refer to it in case there are any disputes.

Bill Forbearance

Loan deferment and forbearance mean that you are allowed to temporarily stop making principal payments, which may include the interest, for a specified period of time, usually up to twelve months. If you cannot stop making the payments, you may be able to at least reduce them.

Borrow Against Life Insurance

If you have a permanent life insurance policy, you may be able to borrow against its cash value. It can be a convenient source of funds, as there are no loan requirements or qualifications. You are also not limited in how the money is spent or paid back. You’ll also enjoy low interest rates. However, be aware that if you default on paying the loan’s interest, you could face losing your policy and its cash value, so consider carefully whether this is the right option for you.


With 200% APRs depending on the state you live in, a pawnshop loan is not necessarily a great option, but it can be better than going to a payday lender. You will take an item of value to the pawnshop, have it appraised, sign paperwork, leave the item as collateral, and leave with the money you need. Just be careful to read all the fine print and to be sure to make any payments on time so that the interest rate doesn’t rise.

Borrow From Home Equity

If you have a home, leveraging it to obtain a lump-sum loan can work for you. With home equity loans, you’ll be given up to thirty years to repay it, and the interest rate, determined by your credit score, is normally fixed. To receive a home equity loan, you’ll need to have at least 15-20% equity in your home.

Summing Up Your Loan Options

As you can see, you have many options for obtaining a loan, any one of which can keep you from falling into the financial quicksand of payday loans. Which one is right for you will, of course, depend on your situation. As you look over them, remember to be sure that your monthly payments will be affordable so that you can handle them over time and not be forced to apply for multiple payday loans to cover them. 

If you do, unfortunately, find yourself in the position of too many debts with high interest rates, keep in mind debt consolidation, which has helped many people climb out of debt. Lastly, never doubt that you can find your own financial freedom. The road to less debt begins with each choice you make, so arm yourself with knowledge and trust your ability to make good spending decisions. It will pay off sooner than you think.

Author Bio: Virendra Kalani is the founder and one of the principal attorneys of OVLG, where he provides debt solutions you can trust. Mr. Kalani is a certified tax attorney with over 42 years of experience in legal research and writing. He provides financial advice on tax, debt management, business law, and estate planning.

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