Optional Small Personal Loans


The pandemic is now in its fifth month. Eviction moratoriums have expired and the $600 weekly federal unemployment benefits has ended. Many are now in an extremely difficult spot. A NextAdvisor survey found that more than half of American households receiving $600 extra had no plans for the future, as high unemployment persists.

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It’s crucial to know what options you have if you are struggling to make ends meet. Payday loans are a bad option.

Payday loans can be thought of as an advance on your next paycheck. The amount borrowed is usually less than $500. The loan amount is paid back with your next paycheck, often at a very high rate of interest.

What to do if you need a small loan

Take a look at your situation if you are having trouble paying bills on time. This is often the most difficult part, especially right now, says Tara Alderete (director of education and community relations, Atlanta-based non-profit financial counselling firm Money Management International). Alderete suggests that you start by breaking down your spending into needs and wants. Wait until you have enough money to purchase something you want.

You may be eligible for assistance beyond a loan if you have a need. If you are struggling to pay for basic necessities like food, utilities or medical bills, there are many local charities and government agencies that can help.

It can take up to a whole month for some government benefits to be granted after you have applied. You can also call 211 if you require immediate assistance. A local operator can connect to you with charities offices like the United Way and the Salvation Army that may have faster turnaround times.

Alternatives to Payday Loans

Although it may seem ideal to have a budget and an emergency fund in order to avoid the need for small loans, emergencies do happen. Even if we survive the worst pandemic of our century, it doesn’t mean that we can stop the need for the car to run and the lights to be on.

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Pay attention to all terms and conditions when you borrow money. You should consider not only the interest rate, but also the fees that will be charged and when they will occur. Understanding the prepayment penalties and loan origination fees attached to the loan can help you avoid unexpected increases in your monthly costs. Make sure you fully understand the terms of your loan so that you are aware of what you will owe and when it is due.

Unsecured Personal Loan from a Bank, Online Lender or Credit Union

A personal loan from a bank might be an option. However, rates can vary depending on your credit rating.

The credit situation is extremely tight right now, which makes it more complicated, according to Greg McBride chief financial analyst at Bankrate.com. If you have poor credit, banks are less likely to approve personal loans. A lower credit score will result in a higher interest rate.

You may not be able to get a small amount quickly and at a reasonable interest rate if you don’t have great credit. However, having a bank relationship is beneficial for federal credit unions. Alderete stated that a payday alternative loan (PAL) can be applied for if you have been a member for at least one month. These loans typically range from $200 to $1,000 and offer lower interest rates than traditional payday loans.

Credit Card

If you are unable to pay your monthly bills, we don’t recommend that you put expenses on a card. However, even though the interest and fees on a credit cards can be less than those on payday loans, they can still be manageable. The average credit card interest rate was 15.09% in early 2020. However, for people with bad credit, it was close to 23.5%. You may be eligible for promotional 0% APR periods with some credit cards. Before you choose this option, make sure to check the APR of your card.

Gig Work

There are many ways to find work that fits your schedule if you have the time. Alderete claims that apps such as DoorDash and Instacart can help you make quick cash on your own schedule.

Although gig work is a great way to save money, you might have to wait up until the next week before you get paid. Bike delivery is possible in some cities but most gig work requires a reliable vehicle. Many delivery services are in high demand. However, many people who are not employed or underemployed are signing up for work at these companies. This makes it more difficult for anyone to earn a decent living.

Withdraw from Your Retirement Account

You can borrow money or withdraw early depending on your retirement account. You will usually have to pay fees and taxes if you withdraw early from your retirement account. This is in addition to the potential return you would be missing on your investment.

  • It’s not necessarily the best option if you have a limited budget.
  • You should also be aware of other loan options

You should avoid traditional payday loans and other loan options. These loans may have the same terms as payday loans, but they come with unique risks.

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Apps for Payday Advances

You may be eligible for a payday loan depending on the job you hold. Your employer will need to establish many payday advance apps.

These apps look like more benign payday loan options. Some don’t send out debt collectors to chase down delinquent accounts, or allow loan rollovers. If your loan is not paid back, you will be cut off from borrowing.

One app offers an optional tipping feature that replaces interest and fees. Although no interest is good, even a $4 tip on a $100 payday advance for two weeks equates to triple-digit APR. These apps will require you to have access to your bank account in order to automatically withdraw the money that you borrowed. If the withdrawal exceeds your account balance, you could be subject to overdraft fees.

Secured Loan

Secured loans are more affordable than unsecured loans and have lower interest rates. Because the loan is secured by something you own, and the lender can take your collateral if you don’t pay the dues,

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A secured loan is more secure for the lender but it can be riskier for you.

There are many options for secured loans including home equity lines of credit (HELOC), pawnshop loans and auto-title loans. Put your car or house on the line if you are having trouble paying your bills.