Those who oppose private money lenders often claim that cheaper payday loans no fax alternatives exist. Their argument may apply to consumers with enough credit to grant the financial flexibility needed to get cheaper short term loan, but for consumers operating under great credit constraints, payday lending is a a lot more practical option. USA Today’s recent piece on pay day loan alternatives is another sad example of the misinformation that poisons the public view. The newspaper’s musings are something more than cheap.
Paydayloans alternatives: 401(k) loans lead the pack
. When it may seem great to be able to take out $ 50,000 or even half your 401(k) plan at low interest with no credit inquiry, there are negatives. But as The Money Alert warns, “You can’t contribute again until you repay”. If you think it is a good idea to hamper your retirement savings during a recession, think again. You should pay back in full, without the benefit of employer matching.
Here’s something else you’ll lose: take home pay via payroll deduction. That may work, unless you lose your job. Then you’ll have to pay it all back in 60 days. You’ll face penalties and the potential of having to file in a higher, more costly tax bracket on your next return. Nobody wants that. A real option is in fact payday loans, which both the University of Michigan and the Federal Reserve have shown to be a proven inexpensive alternative to loan shark use. They’re also much better on a small scale than 401(k) loans.
Credit card cash advances: Also a bad idea?
USA Today tries again with this pay day alternatives idea. Credit card cash advance loans seems attractive (with fancy blank checks and all), but there are major caveats. To begin with, the cash advance APR is multiple percentage points higher than what your credit card business charges for regular purchases. Second, if you use an ATM to get a credit card cash now, there are additional fees. Thus, as Young Money suggests, it is vitally significant to look over terms and conditions of a credit card so you know what you’re getting into, first. Save yourself the trouble of it all and try using an short term loan. An short term loan won’t require that you pay back an entire credit card balance before getting to the advance itself.
The skinny on bank and credit union small loans
Here’s where a consumer’s credit history comes into play. USA Today points out that the rate of interest for small loans from a traditional financial institution could be cheaper than pay day loan, but what the news daily barely deigns to mention is that such unsecured loans are not usually accessible to credit-constrained consumers. Payday loans, on the other hand, are easier to qualify for and enable some consumers to repair credit. USA Today doesn’t tell us this, but payday loans are the real alternative for credit-constrained consumers.
Additional data at these websites
USA Today
usatoday.com/money/perfi/columnist/block/2010-06-15-yourmoney15_ST_N.htm
The Money Alert
themoneyalert.com/401kloan.html
Young Money
youngmoney.com/credit_basics/040216_01/
