This is a collaboration with Creditspring.
At some time or another, most of us would need to access money in a hurry. It could be because of illness meaning we can't work, a washing machine breaking or other emergencies. If you have been considering a payday loan then I want to share some fantastic alternatives to payday loans with you.
What is a payday loan and why do you need alternatives to payday loans
A payday loan is a small amount of money that is borrowed at a high rate of interest, on the agreement that it will be repaid when the borrower gets their next wages – on their payday.
Years ago the payday loan interest was uncapped and they wrecked havoc for hundreds of thousands of people.
These days payday loans are regulated, but they still have a high interest rate.
If you are considering getting a mortgage anytime soon then a payday loan on your credit history will be a big no-no to many mortgage providers.
In an ideal world you will have built up your emergency fund to cover any unexpected costs that crop up. Whilst the advice about how much you should save into your emergency fund rages from 3 months of living costs to 6 months of your wages, anything you save can help towards future emergencies.
If your emergency fund doesn't have enough money in to cover what you need then you can look at some of these other options.
Point of sale credit
Point of sale credit is where you are offered credit for whatever you are buying through the retailer. The retailer won't be administering your credit, rather they have partnered with a credit provider.
You will have seen examples of this everywhere, from massive ‘pay now pay later' signs in high street sofa shops to seeing the offer when you check out online using the Argos website.
Point of sale credit can be useful when it comes to things like needing to replace your washing machine or other appliances that have broken down.
Be sure to check that the monthly payments are affordable for you, and consider the APR. There are lots of offers for 0% credit if you can make the payments back within a certain time frame, but there are also plenty of offers with a high APR.
Sell your unwanted items
You might be lucky enough to find that you have some unwanted items that you can sell and get some money from them fairly quickly.
You can sell items on eBay on one day auctions to get your money quickly, or you can list them on Facebook Marketplace, Shpock and Gumtree.
You could also look for local traders or dealers if you have items like old mobile phone, vinyl records, Lego and much more.
You might be surprised at what actually sells, helping you to get the cash you need together quickly.
Borrow from Creditspring
When I first heard about Creditspring I got very excited. It is a great, unique idea that I want to share with you.
You can become a Core member for £6 a month (£72 per year) and borrow £250 twice a year. Each time you borrow £250 it will be paid back over 4 months. Representative example: Total amount of credit of £500 over 12 months. 8 monthly repayments of £62.50 and 12 monthly membership payments of £6. Rate of interest 0% p.a. (fixed), Representative 87.4% APR. Total amount payable £572.
Or you can become a Plus member for £8 a month (£96 per year) and borrow £500 twice a year. Each time you borrow £500 it will be paid back over 6 months.
Representative example: Total amount of credit of £1,000 over 12 months. The first payment for each advance is £83.35 followed by 5 monthly repayments of £83.33. 12 monthly membership payments of £8. Rate of interest 0% p.a. (fixed), Representative 38.6% APR. Total amount payable £1,096.
Creditspring don't charge interest or late fees, just their fixed monthly membership fee. That means you will always know exactly how much your loans will cost you.
When a financial emergency hits then your Creditspring membership gives you peace of mind because you know that you can borrow money when you need to and you don't have to worry about whether or not you will get accepted.
Borrow from a Credit Union
One of the many alternatives to payday loans is to borrow from a credit union.
Credit unions are run by, and for, their members. They are run as not for profits, and regulated by both Prudential Regulatory Authority and the Financial Conduct Authority (which has a savings protection limit for consumers of £85,000).
Borrowing money from a credit union can be a great alternative to payday loans, but be sure to check out the APR and compare it against other methods of borrowing.
Ask your boss
I will admit that this one will take a lot of guts to do, but the Money Advice Service suggests that if you are in work you could ask your boss for a company loan or a pay advance.
This could even work if you are on Jobseeker's Allowance – you can request a short-term advance, which will then be paid back from your future benefit payments.
Credit card borrowing
If you have a credit card then you can consider using your credit card as one of the payday loan alternatives. You might need to request that you extend your borrowing limit, which can usually be done in your online account.
If you need a payday loan because you are struggling to keep up with your minimum repayments then this isn't a good option to consider, and you should seek help with your debts.