It is easy to claim that flash credits and car loans are only bad and should be banned completely. But the problem is that there is a demand for it. A Pew survey shows that most users of payday loans say that these loans benefit from this – but at the same time most say that the loans offer much needed relief.
Fortunately, there are better ways to raise money in a crisis. Sometimes it is possible to survive without borrowing money. You can sell your assets or request an advance on your paycheck. You can also request emergency assistance, such as Medicaid or SNAP (food stamps), or seek help with paying off other debts.
But even if you have to borrow money, there are better places to declare than a payday loan. In many cases, friends and family can help you with a loan. Pawn shops and many online lenders offer small loans, even to people with bad credit.
Finally, if you have a credit card, a pension fund, a life insurance policy or even a bank account, you can look after it as a source of emergency money. These options are expensive, but in the long run they are better than being stuck in payday loan debts.
Here are several alternatives and ways to avoid payday loans:
1. Budget better
As the 2012 Pew survey shows, most people take payday loans to cover their daily expenses. Borrowers provide explanations such as “I was in the back of my mortgage and cable account” or “I have to pay bills”.
But in such a situation, a flash credit is only a connection. If you do not live within your means, borrowing money does not solve the problem. In fact, it adds by giving you interest on top of all your other expenses.
What you need in this case is a better household budget. You need to look closely at all your expenses – rent, food, utilities, etc. – and find out how much you can really pay for each expense. Then you can look for ways to trim your expenses to bring them into line with your income.
When your salary is small, it can be difficult to stretch it to cover all your bills. But if you look closely at your spending, you can often find hidden budgetbusters that can be cut down.
Some examples are:
- Gym membership . If you are a member of a gym, switch to free or cheap training videos. With an average gym membership of $ 41 a month, this can save you $ 492 a year.
- Cable TV . If you have cable TV, try a cheaper online TV service instead. The average monthly cable bill in this country is $ 99, but Hulu and Netflix both cost around $ 10 a month. So if you cut the cord, you can save $ 89 a month, or $ 1,068 a year.
- Mobile telephone service . If you have a smartphone with a pricey data plan, you can drop it in favor of a simple flip phone with a cheaper mobile phone plan. Coverage of major airlines costs at least $ 60 a month, but a standard prepaid phone costs only $ 3 a month. That is a saving of $ 57 per month, or $ 684 per year.
- Bad habits . If you are a regular smoker or drinker, kicking this habit can help your health and your wallet. A pack of cigarettes costs at least $ 6 in most countries, so if you stop smoking you have at least $ 2190 a year. And just removing two cocktails from $ 6 a week will save you $ 624 a year.
- Food stops . Regular stops at the coffee shop, supermarket or fast-food drive-through add up. Stopping once for a latte, a taco or a soda and a bag of chips only costs about $ 3. But do it every day, and that’s $ 1,095 a year that you could keep in your pocket.
If reducing these small expenses is not enough to make a dent in your budget, try to think bigger. See if you can find a cheaper apartment, give up your car or lower your supermarket bill. Such a cut is painful, but it is now better to tighten your belt than to be in debt for months or years at a time.
2. Use Emergency Assistance
Sometimes you trim all the fat you can get out of your budget and you still ca n’t manage to make ends meet. When that happens, it is no shame to ask for help. Many churches and social organizations can offer help in the short term with rent, food, utility bills and other emergencies. Some of them also offer small loans at very low interest rates.
In addition, there are government programs that help with the following:
- Housing . According to the Center on Budget and Policy Priorities, more than five million American households receive some sort of federal housing assistance. Low-income families can use social housing, subsidized housing or vouchers that cover part of their rent. To request these programs, contact your local public housing office.
- Healthcare . The Affordable Care Act, commonly known as “Obamacare”, offers grants to people on a low income to pay for health insurance. You can discover how to register in your state by going to HealthCare.gov. If your income is low enough, you can get free or cheap healthcare coverage through Medicaid. You can also find affordable medical care through free clinics, trade clinics, emergency care centers and non-profit organizations that help cover prescription costs.
- Food . If your income is low enough, you can receive food aid through the Supplemental Nutrition Assistance Program (SNAP). This is the same program that was once known as “food stamps” – but nowadays the help comes in the form of an electronic card. If you want to know if you are eligible for SNAP, view the interactive tool on the Food and Nutrition Service site.
- Utilities . The Home Energy Assistance Program (LIHEAP) with a low income helps households with a low income at home with heating and at home. Each state has its own LIHEAP program with funding from the federal government. States can spend the money to help people pay for their home’s energy bill, deal with weather emergencies, and minor repairs to heating and cooling systems. To request the program, contact the LIHEAP office in your country.