Payday loans are very profitable for the lender and harmful for consumers. So it is no surprise that you see them everywhere.  Despite efforts from the government and several consumer advocate groups to curb them, payday lenders are thriving.

Paying back payday loans can be financially damaging for borrowers. Many of them get stuck in a repeat cycle where they take a payday loan to pay off the old payday loan. It can be a vicious cycle as the debt grows bigger and bigger.

Alternatives to Payday Loans

Personal Loans

Personal loans have relatively lower interest. The interest rate can vary between 8% to 35% based on your credit.  35% is not a good interest rate but is much better compared to 400%.

A loan-aggregator like Fiona can give you interest rates from multiple providers in a few minutes. Just fill out a few basic details to get started.

In recent years, peer to peer lending has been a popular source of funds for people strapped for cash. You will be borrowing money not from a traditional bank but from a pool of investors.

Well-known peer to peer lending apps include Prosper, Lending Club, Peerform, Upstart, and Kiva.

Get an advance on your paycheck

Another alternative to expensive payday loans is getting an advance on your paycheck. It is a way of getting early access to your earnings from your job.

One of the companies that offer an advance on your paycheck is Earnin. Earnin gives you an advance and you payback via a deduction from your next paycheck. There is no fee involved. Earnin lets you tip what is fair.

Negotiate a payment plan

If you are having difficulty making your utility or credit card payment, call them to see if you can work out a payment plan. Many companies will be willing to give you more time to make payments.

Ask for help from family and friends

You can ask family and friends for help if you need money quickly.  Remember to pay them back quickly because otherwise, you will damage the relationship.

Credit card

Credit cards have high-interest rates though not as high as payday lenders.  Many credit cards allow you to take cash advances.  Usually, the rates for cash advances are higher than they are for regular purchases.

Credit Counseling

If you are having financial difficulties, consider getting credit counseling.  A good credit counseling service can analyze your debt and negotiate lower interest rates and payments.  Take time to vet the companies as there are many companies that will prey on consumers who are struggling financially.

Bottom Line

Payday loans are notorious for their high fees and interest rates. But you have other options when you need money quickly. Consider getting a personal loan or an advance on your paycheck.  You can also tap into your friends or use a credit card. Staying away from payday loans will not only save you money but will help you get back on feet quicker financially.

Millions of Americans are “unbanked” – meaning that they do not have a bank account.  There are several reasons why people don’t have a bank account.  They lack proper IDs, do not have access to a bank nearby, or distrust the banking system.  Or they may earn money in cash and wish not to deposit it in a bank account to avoid scrutiny.

One of the reasons it is so hard to cash a check without a bank is that the bank or the store cashing the check needs to protect itself against fraud. So expect the bank to ask for government-issued ID.  That’s usually a driver’s license.  But if you don’t have one,  you can use a passport or a green card.  Depending on the bank, a military or a school ID may also work.

Where to cash a check if you don’t have a bank account

Bank or Credit Union that issued the check

If you receive a check, your best bet to cash the check is to go to the bank or the credit union that issued it.  For the bank, this has the least fraud risk and they will be happy to cash the check for you if you have two forms of government-issued ID (eg. diver’s license and passport)

This will be your cheapest option. It may even be free if the check is within a certain dollar amount.

Keep an eye on the fees that banks may charge you for cashing the check. The fee varies from bank to bank.  Capital One and Citibank have zero fees in most cases.  Chase and Bank of America charge $8 to cash a check.

Endorse a check over to a friend

If you have a friend you can trust and he or she has a checking account, you can endorse the check over to them.  They will be able to cash the check for you.

Not all banks do this, so check with your friend and the bank if this will work. To endorse a check, sign and write “Pay to the order of [your friend’s name].  Then they will be able to deposit into their checking account.

Walmart

Walmart will cash most checks for a  reasonable fee.  Not surprisingly, Walmart charges lower fees than most banks.  You can get cash or even Walmart cards if you prefer.

Grocery Stores

Grocery stores like Kroger, HEB, etc. also cash checks.  Requirements vary between stores, so call them before heading out to the store to cash a check.

7-Eleven Stores

7-Eleven stores have automated kiosks where you can cash a check.  In addition to cashing checks, these kiosks called Vcoms (stands for Virtual Commerce) also allows you to pay bills.

Check cashing stores

These stores go by many names – payday lenders, title loans, and cash advance.  A popular payday lender is Ace Cash Express, But what these stores all have in common is that they charge extremely high fees for their services. If you borrow money from them, expect to pay punitive interest rates.

But for those who don’t have access to a bank nearby, these check cashing stores can help cash a check. Make sure you read and understand the fees.  This is likely to be your most expensive option.

Prepaid Debit Cards

If you have a reloadable debit card, you may be able to deposit your check as a reload.  This is one of the least known ways of cashing a check and you can do it from your phone.

Most of these reloadable debit cards have a mobile app that you can use to upload and cash a check.  If that’s not an option, you can always walk into a “partner location” and reload the card with your check.  You can the partner locations from the debit card provider’s website.

Prepaid debit cards get a bad rap due to the high and hidden fees they charge.  But they can be a good way to cash a check.

Places that don’t cash a check

We have some to expect warehouse clubs like Costco, Sam’s Club, and BJ’S Wholesale Club to do everything.  But none of these clubs cash a check. They don’t even cash business or government checks.

Bottom Line

There are many places you can cash your check if you don’t have a bank account. Credit unions, banks, grocery stores, and even some convenience stores cash checks. Fees vary and some places such as check cashing stores are more expensive than banks.  Always understand the fees before you cash a check.

First, let us take a look at the basics.

What is a hard pull or hard inquiry?

When you apply for a credit card, home or auto mortgage, the lender will typically check your credit before making a decision on loan approval and your interest rates.  These are hard pulls and affect your credit score.

A single hard pull decreases your credit score by a few points and stays on your credit report for two years.  But if you apply for too many credit cards or loans in a short period of time,  these hard inquiries can have a big negative impact on your credit scores  Too many loan applications in a short period tell lenders that you are looking to add debt and that you may be a potential high-risk customer.

You will typically know when a hard pull is made. When you apply for an auto or home loan, lenders will give you a form to sign giving them permission to run a hard inquiry.

One way to manage this is to spread out our loan applications – especially loans of different types (that is spread out your applications for home loans, auto loans and credit cards as much as you can)

What is a soft pull or soft inquiry?

A soft pull happens when an employer or a lender checks your credit as part of a background check.  Credit card companies run soft credit checks before sending you offers in the mail.  Soft inquiries can sometimes happen without your permission as in the case of credit card offers.

Soft pulls or inquiries don’t affect your credit score. Some credit bureaus don’t even record it because it is not tied to any application for credit.

Managing credit pull requests

If you concerned about too many hard pulls on your credit. ask the lender, cable company, or your utility company if the credit check is a hard or soft pull.

Try to keep the number of hard inquiries down.  When you apply for a home or car loan, you are likely to be “rate shopping” – requesting rates from different lenders.  Though this will likely trigger multiple hard pulls, credit bureaus understand that consumers shop to get the best rate. So they group these hard requests into one hard pull or request in your credit report.  Note that these inquiries must be in the same category (eg. home loans).  If you apply for a home loan, a car loan, and credit cards, all at the same time, they will be treated as different inquiries and will affect your credit score negatively.

Bottom Line

When you apply for a line of credit, the credit inquiry is likely to be a hard pull.  Hard pulls stay on your credit report for two years.  Though a single hard inquiry will not affect your credit score, too many hard inquiries in a short period of time will lower your credit score.

A soft pull on the other hand is a background credit check run by an employer. It doesn’t affect your credit score.  When dealing with lenders or services, always ask if the credit inquiry will be hard or soft.  Sometimes you can get by with just a soft inquiry.

If you considering a personal loan, do your homework ahead of time to get the best deal. This article will help prepare you to get the best deal on your personal loans.

What are personal loans?

A personal loan is money borrowed from a bank.  Personal loans are mostly unsecured, meaning that they are not backed by collateral.

Unsecured personal loans are different from other loans such as home and auto loans.  For home and auto loans, your home or car acts as collateral.  If you don’t make good on your payments, the bank has the right to take your home or car.

When banks make personal loans, banks want assurance that you will repay the loan because the loan has no collateral.  So they look at credit score and debt to income ratio.

How much can you borrow?

Typically, you can borrow up to $50,000 if you have good credit.  Some lenders may provide loans up to $100,000 if you have high income and excellent credit.

Personal loans typically have a term of 1 to 5 years.

Where can you get a personal loan?

You can get a personal loan at a bank or credit union.  Online lenders and peer to peer lending programs also offer personal loans.

What are interest rates like for personal loans?

The interest rate on personal loans ranges from 5% to 36% depending on your credit score according to Bankrate.  There may be other fees such as origination fees.  Analyze all the costs and understand how much you are paying in fees and interest before committing to a loan.

What factors do banks consider when providing personal loans?

Credit Score

As with all loans, your credit score is an important factor deciding whether you qualify for a personal loan. Lenders typically require a credit score of at least 660 for a personal loan.

Income

Banks look at your income to evaluate your ability to make monthly payments.  If your payments on a potential personal loan are too high relative to your income, you may have a tough time qualifying for the loan.

Employment History

Since most people get their incomes from employment,  banks also look at your employment history.  If you have been working at the same employer for a few years, banks consider your employment to be stable

Other debts

If you have too much debt, banks are unlikely to give you another loan.  Banks look at your debt to income ratio (DTI).  Though lenders have different DTIs, many of them require your debt payments to be below 35% of your total income.

How can I get qualify for a personal loan with bad credit?

If you are unable to qualify for a personal loan on your own, getting a cosigner with good credit can help you get the loan.  The cosigner agrees to guarantee the loan if you fail to make payments.  A cosigner can be a friend or a family member.  But he or she needs to have good credit.

What documentation do you need to get a personal loan?

Typically lenders will ask for pay stubs, proof of residence, and a copy of your driver’s license.  Lenders may ask for additional documents if necessary. The faster you can provide the documents, the faster the lender can process the loan.

How do I ensure I get the best interest rate?

Shop around for the best deal.   Loans with fixed interest rates give you certainty on your monthly payments. Your bank or credit union may not offer the best rate.  Consider online lenders as they are likely to offer competitive terms.

Read the fine print

The terms offered by lenders vary quite a bit. Read the fine print to understand the terms.  Is there a penalty for prepayment?  Are you paying origination fees? Are you paying a fixed rate or a variable rate?

Set up automatic payments

Consider setting up automatic payments from your bank account to make monthly payments.  This will allow you to pay on time every month.  Some lenders give you incentives such as a lower interest rate if you set up automatic withdrawals.

Bottom Line

Personal loans are a great way to get cash.  You can get a personal loan from a bank, credit union, or even an online lender.  Preparation is vital when you apply for the loan.  Get your documents ready and shop around with a few vendors to get the best rate. Always read the fine print to avoid surprises later.

Here are some strategies you can use.

1. Tap into emergency savings

Hopefully, you have an emergency fund with 3 to 6 months of expenses saved for situations like this. If you have an emergency fund, use funds from this account before exploring other options.

2. Ask Family And Friends

It is difficult to ask a friend or a family member for help. But as long as you ask for a  one-time financial need, most friends or family will be happy to help.  This is a much better alternative than borrowing from a payday lender or getting a cash advance from a credit card.

Always pay back as promised to keep your relationships strong.

3. Hold A Garage Or Yard Sale

Most people have things in our homes that we don’t use.  You can sell those items in a garage sale.

Buyers in a garage sale will try to bargain for a good deal, so you will not get the maximum value for your items.

4. Get A Side Gig

More people are working in the gig economy than ever before.  One in three US workers are freelancers. Depending on your interests and skills, you can make money with a side hustle.

Most common side hustles:

• Drive for Uber or Lyft
• Deliver for Postmates
• Sell services on gig websites such as Fiverr or Upwork
• Do micro tasks (surveys and other small tasks) on Amazon’s Mechanical Turk
• Tutor over Skype
• Walk dogs

5. Liquidate Investments

If you have liquid investments (stocks, bonds or mutual funds and CDs), you can sell them quickly to convert them to cash.

The downside is that once sold, these investments will no longer compound, and generate a return for you. It might take you a while to build your portfolio back to the original level.

6. Cash Advance On a Credit Card

You can borrow available balance on your credit card in the form of a short-term loan.  Know that your credit card may charge you cash advance fee (3% to 5%), and a higher interest rate (than regular purchases).

Taking a cash advance on your credit card can get very expensive due to high-interest rates, and daily compounding. It will also increase your credit utilization ratio, which can hurt your credit, and reduce the available balance for regular purchases.

7. Personal Loans

If you have good credit, you can borrow money from a bank without collateral.  The interest rates for personal loans are much lower than what credit cards charge.  You can pay off the loan over a set period of time.

Other Ideas

Cut Your Budget

Take a look at your budget to check if there are areas you can cut expenses.

• If you eat out often, consider cooking your own meals to save money.
• Do you have magazine or video subscriptions that you cancel?
• Delay high dollar purchases if you can.

Bottom Line

No one likes a financial emergency but the reality is that it happens more often than we assume.  Have an emergency fund, and have a plan in place in case it happens to you. Review your options and costs when considering an emergency loan, and ensure that you can repay the loan.

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