What Is a Payday Alternative Loan?

How to Qualify For a Payday Alternative Loan

If you’re looking for an easy way to make quick money, then you’ve probably considered trying your hand at online trading. But if the thought of risking money makes you nervous, then you should probably rethink this. Wouldn’t it be better to make use of the many generous providers that offer payday alternative loans?

Also known as ‘microloans’ or ‘money-lenders’ loans’, these alternative loans allow you to make fast cash without requiring an intense vetting of your creditworthiness. Simply apply for a small loan (with interest rates usually starting at around 10% per year), and you’ll have your money, or part of it, deposited in your account within a matter of days. Plus, you won’t have to put your credit card through the ringer for a big-ticket item. This option may be particularly appealing if you’re looking for a way to treat yourself or a loved one during a special occasion.

The Appeal Of Online Trading

If you’ve tried online trading before, then you know that the appeal is in the simplicity and the convenience. You can do all of the research and back-testing you need without having to leave your desk. All major exchanges are available 24/7, so there’s never a bad time to trade.

The flip side is that this is highly unreliable income. You’re always going to be accepting some level of risk, because you won’t know how the market is going to react to any given situation. If you want sustainable, safe revenue that you can rely on, then online trading isn’t for you.

On the flip side, payday alternative loans provide a steady income stream with minimal effort and no risk involved. What’s not to like?

The Differences In The Two Finances

One of the great things about payday loans is that they’re very similar to the traditional credit or loan transaction you’re probably familiar with. While there aren’t any direct cash deposits involved, just as with a regular loan, you’ll need to make steady payments to avoid incurring any kind of finance charges. This means that, just like with a regular loan, you need to make sure that you’ll have the funds to pay back the loan when it comes due. Otherwise, you’ll have to pay extra fees that can add up quickly.

The great thing about payday loans is that, because they’re similar to a credit transaction, you’ll have all of the normal credit scores and ratios in mind when making these important financial decisions in your life. If you meet the criteria and are approved for a loan, then you’ll be able to take your pick from a variety of financial products and providers, many of which offer these loans to multiple credit and income levels.

Protect Your Money With Insurance

One of the things you should consider if you’re going to be using online trading or payday loans is how to protect yourself from financial loss. One way is to buy insurance against the risk of losing money in online trading and other ventures. For example, you may want to look into buying fidelity insurance, which covers your losses up to a certain amount due to computer malfunction or hacking. You may also want to consider buying stock against loss insurance, which protects you from financial losses due to the market value of stocks declining.

Buying insurance isn’t something that should be overlooked, especially with the volatility that’s present in online trading and other risky ventures. If you want to protect your money, buying insurance is often a good place to start. It’ll protect you from financial loss, and if you ever do lose money, then it’ll also give you the funds to get started again. Without insurance, the losses can quickly become too great to recover from.

Get The Best Interest Rate

One of the primary reasons that you should consider opting for online trading instead of payday loans is the interest rate. With a payday loan, the interest rate is usually quite high, with the average rate doubling that of a standard loan because there’s no government backing. On the other hand, most online trading platforms will work with you to find the lowest rate possible, which can sometimes be as little as 2%. If you want to get the best rate available, then opt for online trading.

This is a huge advantage, not only does it make a world of difference when it comes to the interest rate, but it also provides some protection from falling equity prices in the event that you do lose money. The lower the interest rate, the greater the risk, so you’re always going to be taking on some level of risk no matter your chosen source of income, but with a low-interest rate, it’s likely to be greater than with a high-interest-rate loan. This is why most banks and credit cards won’t offer you the lowest rates possible, but instead prefer to stick with the safer and more traditional ways of making money.

If you’re looking for an easy way to make quick cash, then you’ve probably considered trying your hand at online trading. But if the thought of risking money makes you nervous, then you should probably rethink this. Wouldn’t it be better to make use of the many generous providers that offer payday alternative loans?

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Lenders that provide short-term loans with high approval rates have created a new loan category that is ideal for those times when a cash injection is needed but traditional lending options such as credit cards or personal loans are not acceptable. The loans are known as Payday Alternative Loans (PALs) and if you qualify, they can be an affordable option for cash-flow issues. Let’s take a closer look at how to qualify for a payday alternative loan.

The Basics

PALs are short-term loans provided by non-bank lenders that operate under the radar of banking regulators. The loans are designed to satisfy the demands of individuals and businesses that need quick cash flow solutions. The loans are governed by federal law and although they can be quite costly, the fees and interest rates are usually within acceptable ranges. There are different types of Payday Alternative Loans that are better suited for specific situations. Let’s take a look at how you can identify which type of PAL is best suited for your needs.

The Bad Credit Short-Term Loan

If you have bad credit and you are looking for a loan that is not governed by strict underwriting requirements, you should consider the bad credit short-term loan. The minimum credit score for this type of loan is usually between 400 and 800 and because of the affordable borrowing amounts and relaxed credit checks, the bad credit short-term loan is one of the most popular types of loans provided by non-bank lenders. The loan fees are high but because the credit score is so low, the lender will be inclined to offer you a better deal than they would an individual with a perfect credit score. Even if you have good or bad credit and need a short-term loan, you should consider this type of loan because it has some great features.

One of the major benefits of the bad credit short-term loan is that the lender does not require an extensive credit check. Because the credit scores are so low, the lender will often resort to a simple inquiry into your creditworthiness. While this might not seem like a major benefit, as we mentioned before, the low credit scores of the loan make it more attractive to lenders. In this way, the bad credit short-term loan is like a ‘get me now’ button for cash-strapped individuals and businesses who have bad credit. The loans are designed to provide quick cash injections and enable borrowers to pay their bills on time. Having said that, the borrowers must be able to demonstrate that they can repay the loans and the lenders must have sufficient protections in place to prevent future credit issues.

The Better-Than-Paying-Pension Fund Short-Term Loan

If you are close to retirement and you need some quick cash, you can consider the better-than-paying-pension fund short-term loan. This type of loan provides a modest yearly benefit to the borrower that is added to their retirement savings. Because the loan is funded with the pension money that the individual is entitled to, it is considered ‘alternative’ to traditional methods of saving such as a pension plan. Similar to the bad credit short-term loan, the better-than-paying-pension fund short-term loan requires a low credit score (typically between 400 and 700) and a simple inquiry into your creditworthiness. However, instead of just looking at your credit score, the lender will also examine your investment portfolio to ensure that you are not leveraging the loan to the detriment of your retirement savings. If after reviewing your application, the lender determines that the loan is affordable and that you can repay it with your expected monthly pension income, they will issue the loan and the borrower must pay back the loan in full with interest before they can continue to draw down the benefits of the pension fund.

The Secured Loan

If you have a good credit score and you need a loan that is fully collateralized, you should consider the secured loan. The borrower posts collateral as security for the loan and if they do not pay back the loan in full with interest, the lender can seek reimbursement of their losses. In most cases, the collateral will be the borrower’s residential or commercial real estate but it can also be a vehicle, inventory or other valuable assets. The key takeaway here is that with a secured loan, the lender is not at risk of losing money and they can thus lower the interest rates of the loan. Additionally, since the lender is not at risk in most cases, they can be more generous with the terms of the loan and the borrowers must meet stricter credit requirements. The minimum credit score for this type of loan is usually 800+ and it requires an extensive credit check as well as proof of income. If you are looking for a long-term loan that is relatively affordable with good repayment terms, the secured loan is a viable option.

The Best Overall Loan For You

Depending on your unique circumstances, you might be best suited for one type of loan over another. The key is to find a lender that is accessible (for example, if you have bad credit, the lender might not take you seriously) and that has the loan types that you are looking for. Once you have found that perfect lender, you can apply for the loans and get the cash you need.

With the Covid restrictions becoming less numerous, people are looking for ways to get back out on the town. For those longing to relive the ‘good old days’, there are alternatives to the conventional credit union that can provide a valuable service. Here is a short guide to three traditional credit union alternatives, as well as one online credit union option, that are worth checking out.

Traditional Banker-Friendly Credit Unions

The first and most obvious alternative to the conventional credit union is the ‘traditional banker-friendly’ credit union. This type of credit union was originally designed to give small businesses a way to get loans from larger financial institutions. That functionality has not changed, but the way in which these credit unions operate has. The ‘traditional banker-friendly’ credit unions pride themselves on being accessible and friendly to individuals. Most notably, these credit unions were established to provide a service to people who would not normally qualify for ‘normal’ banking relationships. This is because of the nature of their business. Essentially, these are credit unions that would not exist if it were not for the fact that banks are closed to most individual consumers. Because of this close association, these banks are often referred to as ‘Banker-Friendly’ credit unions. The advantage of choosing a traditional banker-friendly credit union is that you can get a bank account and conduct all your financial transactions just as you would with a traditional bank. While the functionality is more or less the same, the atmosphere feels very different — more cooperative and helpful. When opening a business account, you will have the option of choosing either a checking or a savings account. A good rule of thumb is to keep your business liabilities to a minimum and use your business account for payroll and other day-to-day business expenses. For those looking to get a loan from a bank, the best strategy is still to ask your bank manager for an introduction to a loan officer. It never hurts to have a friend in a high place.

Peer-to-Peer Lending

An alternative to the traditional banker-friendly credit union is the ‘peer-to-peer’ lending credit union. As the name suggests, in this type of credit union you will not find traditional bankers. The members-only organization, rather than offering loans, give individuals the opportunity to lend money to other members. This is done through an online platform, where members can post their financial needs and members willing to lend can sign up to do so. Naturally, interest rates vary between the different lending platforms — it is usually higher for short-term loans — but that is the nature of the beast when you are not using a bank. Because these loans are completely digital, there is never any risk of loss due to financial fraud. As with any online platform, the security of personal information is a key concern. To avoid any unwanted advances, users should always bear in mind that they are dealing with another individual and they should not share any personal or financial information. Naturally, as with any new relationship, it is always a good idea to consult with a lawyer before getting started. Finally, it is always a good idea to look at the credit ratings of the different lending platforms before committing to any serious financial dealings. If you do decide to go ahead with the loan, make sure that you get all your questions answered in advance and that you are not coerced into taking out a loan that you could not comfortably afford.

Rent-to-Own Credit Union

Another type of credit union that was popular a few years back was the ‘Rent-to-Own’ credit union. Essentially, this is a credit union that allows users to rent equipment such as business laptops, desktops, etc. at affordable rates. Once the equipment is returned that is was rented (most credit unions have a 30-day return policy), the user then has the option of either continuing to rent or purchasing the equipment at a discounted price. In some cases, users can even trade equipment (or parts of an equipment package) to obtain a better deal. Naturally, this is a type of credit union that does not exist for the purpose of providing loans, but it does provide individuals with beneficial financial tools. When choosing a rent-to-own credit union, it is important to keep in mind that the equipment you are renting (or trading) is likely to be of a higher quality than you would normally be able to afford. Naturally, this is a type of credit union that does not require a lot of maintenance and it is also a good choice for those who want to maintain a low credit card utilization. However, in general, this type of credit union is for those who want to rent equipment rather than own it. Naturally, this type of credit union does not qualify for loan opportunities either.

Direct Banking

Taking the last type of credit union as a subset, the ‘direct banking’ credit union puts the consumer at the center of the process. Essentially, with a direct banking credit union, the user has the option of choosing which types of financial services they want to offer — online bill payment, payroll, etc. This direct banking model was inspired by the rise of ‘robo-advice’ where high-quality financial advisors are available to guide consumers through the process of getting a personalized loan. In some cases, users can even get a loan without having to go through a financial institution. Naturally, this is a type of credit union that gives individuals complete control over their financial data. Naturally, as with any new relationship, it is always a good idea to consult with a lawyer before getting started — just to be on the safe side.

Apart from these four types of credit unions, there is arguably one more that deserves a mention here — the online credit union. As the name suggests, in an online credit union you will be able to do all your financial transactions entirely online. Naturally, this cuts out the middle man and the associated fees. As with any new technological innovation, initially this probably will not be offered by every financial institution — it will take time for the industry as a whole to catch up. For small and mid-sized businesses that struggle to get traditional bank loans, the online credit union is a valuable option that provides a cheaper and more convenient way to get the business loans that matter. Naturally, it is always a good idea to look at the reviews before committing to any serious financial dealings — something that cannot be overstated.