After the Consumer Financial Protections Bureau proposed a new rule imposing stricter requirements for pay day and car title loans, many who are strapped for cash wonder where to turn. Apparently, following a review of the credit market available to households with lower credit scores, alternatives are out there and they may help break the cycle of financial devastation caused by borrowers depending on a string of high-cost payday loans to get by.
Here is a list of options to consider:
- Although not ideally the best bet to work your way out of debt, among the alternatives to payday loans are subprime credit cards. Even with an interest rate of 36 percent APR, it may surprise many that they are one-tenth as expensive as payday loans.
- Hundreds of federal credit unions participate in the National Credit Union Administration’s “payday alternative loan program”. Loans are available up to $1000 for up to a six month term. Borrowers are required to have an account in which payments may be withdrawn.
- Traditional consumer finance companies market installment loans to subprime households and can often offer more credit than payday lenders.
- Pawn loans, where collateral in the form of a pawned item is exchanged for cash, are better than payday loans that sometimes are as much as 400 percent. And they come with a an exit strategy – the lender keeps the item and the borrower walks away, owing nothing further.
If you are facing a difficult financial situation, contact the bankruptcy law offices of Charles E. Covey for help. There are various strategies to explore to solve your debt problem, which may include filing for Chapter 7 or 13 bankruptcy protection.
Source: Washington Post, “Think There’s No Good Alternative to Payday Loans? Think Again.”, by Mike Calhoun, June 30, 2016.
