Best Alternative Payday Loans

When you need fast cash, payday loans in Australia probably come to your mind first. These are handy and straightforward financial deals that allow you to borrow anywhere from $200 up to $5,000. And you have to repay that amount plus fees and interest within the agreed term.

Payday loans have the benefit of an almost instant response, so you know what you’re up to. As direct payday loan lenders have pretty loose lending criteria, almost every employee with a steady income can apply for these loans, even if their credit score is below average. And since there’s only a brief credit check, the approval is almost guaranteed. 

Payday loans are convenient and available, so people can take them out even when they don’t need money urgently. They can even become too cosy with the option of being in constant debt, which can only worsen their financial problems. 

So, payday loans aren’t as good as they sound, and they might not always be the best solution to your problem. That’s when you should look for alternative payday loans.

What this article covers:

Why Payday Loans Aren’t the Best Option for You

Despite all the benefits, you must remember all those not-so-good sides of payday loans. Taking out this quick cash payday loan every once in a while can lead to overindebtedness and severe financial problems.

alternative payday loans

In addition to being available and only seemingly helpful, the costs of these small payday loans can build up fast. Amounts lower than $2,000 carry no interest, but they come with the establishment and monthly fees that add up a lot to the overall loan cost. For instance, you can pay $30 in fees for every $100 you borrow.

And if you need more than $2,000, you have to pay an interest rate of up to 48% per annum. In comparison, most alternatives carry lower APR. The rate on express payday loans depends on the amount you borrow, the lender, and how risky they assess you. So the lower the credit score you have, the higher interest rates you face.

Lenders offer a repayment period of a couple of weeks up to a year or two. But, in general, most payday loans are repaid with the next paycheck. If you fail to meet the deadline, you can ask for a rollover (repaying this urgent payday loan in the next pay cycle), but the lenders will charge an extra fee for that.

Are There Any Alternatives to Payday Loans?

Luckily, lenders offer a whole range of other products that can be excellent options. So you can shop around for direct lenders who offer deals for:

  • Personal loans
  • Debt consolidation loans
  • Payday alternative loans
  • No-interest loans
  • Low-interest loans
  • Centrelink loans
  • Pay on-demand
  • Credit card cash advance
  • Borrow from friends or relatives

alternative to payday loans

Personal Loans 

Let’s say you need to borrow $5,000 to settle some debts. After payday loans, personal loans are your second thought when thinking about ways to get quick cash. Lenders have a large offer of these financial products, and you can use them for various purposes, from holiday shopping to debt consolidation.

For starters, personal loans enable you to borrow more. Some lenders can give you maximum amounts of up to several tens of thousands of dollars without asking for collateral if you have a good or excellent credit score. 

Interest rates on personal loans vary and can sometimes be high, but no more than 30% in the worst-case scenario. That still makes them a sound alternative. Also, you can choose between fixed or variable interest rates. And as an applicant with good credit history, you can count on more flexible repayment terms.

Lenders might ask for a guarantee if you borrow more money or have a low credit score. In that case, you can choose between pledging something valuable or adding a co-signer. That increases the chances of approval in 24 hours and allows you to borrow money at a lower interest rate.

Another advantage of personal loans is a longer repayment term – from two to five years. The possibility of splitting your debt into smaller instalments will lower the chances of loan default and give you more time to get your finances in order.

alternatives to payday loans

Debt Consolidation Loans

Taking out a payday loan when you already have several lines of credit isn’t a good idea. As you have to settle multiple obligations, adding another short-term debt can create an additional headache for you. If financial planning isn’t your forte, you might miss or be late with the payments, which always brings consequences.

Debt consolidation loans are a specific form of personal loan designed to help you handle multiple debts. You can turn all your monthly obligations into a single instalment. Furthermore, you can agree with the lender that the payment will be on a specific date, for example, when you get your salary or Centrelink benefits.

In addition to helping you plan expenses and get higher amounts to solve your problems, this loan can bring you additional savings. Since you’ll pay one instead of several instalments at once, you’ll save on interest.

It’s easy to apply for this loan, as almost all lenders provide simple online forms and easy access to their financial products. These are all payday loans with no faxing, as you don’t have to send paper documents. 

better than payday loans

Payday Alternative Loans

This method of financing is an alternative to payday loans, but it’s not widely available. It’s offered only by credit unions that belong to the National Credit Union Administration. And you have to be a member of these institutions to get access to these funds.

PALs are small loans, as little as 200 dollars and no more than $1,000. But even that money can help you solve current problems and avoid high fees related to regular payday loans. And you can even use PALs to repay existing payday loans.

The great thing about these loans is the extended repayment period. You have up to six months to settle this debt, plus a one-off application fee and interest. The maximum APR for this financing method is 28%.

Credit unions that offer these loans have less stringent lending criteria. They work as lenders for bad credit borrowers, so your credit score doesn’t have to be excellent to apply. These lenders will pay more attention to your ability to repay the loan and not get into too much debt. So they need proof of your income and your recent bank statement.

The limitation regarding these loans is that it doesn’t allow rollovers. So you can’t be late with repayments. Also, you can’t get more than three PALs within six months, even if you settle your debts on time.

loan alternatives to payday loans

No-Interest Loans

No-interest loans (NILs) can be an excellent option for low-income borrowers. For instance, if you have a gross annual income of no more than $70,000 alone or $100,000 for the entire household, you’re eligible to apply for this type of financing. It’s also available for people with a pension or health care cards.

With NILs, you can borrow up to $2,000, but the most common amount is $500. That’s not much, but it comes in handy when you need money fast. And no matter how much you take, you pay back the same amount – no fees, no interest, and no hidden costs. 

Loan terms can go up to 18 months, and you have to prove you can repay this short-term loan within the agreed time. So there’s no detailed credit check for no-interest loans. 

But these aren’t no-matter-what arrangements, as you still have to meet certain criteria. Also, you can use this money only for essential goods and specific services, like medical, dental, or education services. And finally, these no-interest loans are available only in a few banks. 

better options than payday loans

Low-Interest Loans

Low-interest rate payday loans are similar to no-interest loans, as they both target low-income borrowers and those who don’t qualify for traditional loans. If they opt for this financing method, they can borrow up to $3,000 without paying any fees.

But as their name said, these loans still include certain interest, which is way lower than on payday loans. The APR for this loan is usually just a few %, and it’s fixed. It means your instalments will be the same over the loan lifetime, which is up to three years.

Lenders will approve your application, which is ideal if you’re on benefits like pension or tax family benefit A or your income after tax is lower than $35,000 annually. But you must also prove that you’ve resided at your current address for more than three months.

Even the lowest-interest loans require a credit check, as lenders must be sure you can afford them. And just like the no-interest loan, this loan can also be used for household, car, or medical-related goods and services. But you can’t go on a holiday with this money or pay off your credit card balance. 

non-payday loan options

Centrelink Loans

When on Centrelink, it means your initial income is low, and this additional benefit will fill in the holes in your budget. But even with having a pension, you can still apply to direct lenders for payday loans.

This type of financing is suitable for people whose financial situation isn’t great but who still need some fast cash. With Centrelink advance payment, they can get a small loan with no interest or fees. The only condition is to pay it back with the next Centrelink payment or within the next six months, depending on the amount you borrowed.

Centrelink advance payments aren’t large, but they can be a good option in a pinch. These amounts are limited to a portion of your income and adapted to your situation to ensure you can repay this loan with no problems.

For these loans to be approved, the lender must be sure that you can afford to borrow money this way. So you’ll need to prove your income, expenses, and liabilities. The combo of all these should leave you enough money to pay back this new debt and help you avoid financial difficulties.

improved loan choices

Pay-On-Demand

Pay-on-demand loans are probably the best alternative, as they provide the same speed and quality of service but at lower costs. They only come with a small, fixed fee or a low-interest rate, depending on the lender.

Pay-on-demand is an app-based service. It allows you to get your pay early, that is, a portion of your wages before the pay date. These apps are available 24/7, so you can ask for this small loan, even on weekends and get it instantly. 

These loans work by connecting to your bank account. Thus, the lender gets an insight into your finances and decides on loan approval fast. There’s no need to check your account requirements, as these loans carry minimal risk of default.

Failing to repay pay-on-demand is almost impossible since the borrowed amount will be automatically withdrawn from your bank account on the agreed date, any time of the week. If you don’t have enough funds to cover it, this amount will be reduced from your account as soon as you have enough money, but that can trigger extra fees for late payments.

alternative lending options

Credit Card Cash Advance

Credit cards are handy pieces of plastic you can use to pay for goods or services whenever you need them. They carry a lower interest rate and less risk of falling into a debt trap. That’s because the card limit restricts your spending.

You can use it to borrow money in the form of a cash advance loan, which is a certain percentage of the card’s limit. These are generally sums of several hundred dollars that can be available to you quickly after signing up for this loan.

You pay off the cash advance when you pay off your card balance. You also pay interest on this debt, for which there’s no grace period, as for the regular use of a credit card. And the interest rate is higher than for regular purchases.

Another good thing is that you can carry this debt longer than payday loans. For instance, you can only repay minimal card balances and thus avoid late fees and penalties for missed payments. And the money you pay for settling your card balance will go toward cash advance repayment first, as the highest-interest debt always has a priority.

better loan solutions

Borrow from Friends or Relatives

This option is available at any time and comes with no costs at all. If you have people who trust you and know your spending habits are good, you can rely on them to give you money and help you overcome your current financial difficulties.

People willing to lend you money will do that whenever you need it. It’s like asking for a Sunday payday loan, but without a previous credit check, verification of your data, and waiting. By agreeing to lend you money, your friend or relatives can give it to you immediately.

This alternative can’t harm your credit score if you default on loan repayment. But there’s a chance that not following the agreed loan terms damages your relationships with friends and family. To prevent this from happening, treat this loan like any other and respect your lender.

To Sum Up

Alternative payday loans can be a lifesaver if you find regular payday loans too costly. So if your need for money is urgent, there are several financing options better than payday loans. You just have to discover which of them works for you.

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