Alternatives to Payday Loans

Given the problems associated with payday advances, it's wise to check if you have any alternative options available to you when you need fast cash. Payday loans should only really be used as a last resort because of the high costs involved, and the other types of credit listed below may well be a better option if available.

Bank Overdraft

Overdraft facilities are often available for similar amounts to payday loans, and are generally much cheaper to service as you pay interest on the credit rather than high fixed monthly charges. It may however be difficult to arrange an overdraft, especially in today's straightened economic times.

Credit Unions

There are hundreds of credit unions in the UK. These are non-profit organisations set up by private individuals, and offer lending facilities at very good rates. The downside, at least in terms of being an alternative to a payday loan, is that most credit unions need you to previously have been a saver with them before you can be a borrower. This isn't always the case though, so it might be worth checking if you have such a union in your area, and whether or not they can help.

Credit Cards

Putting it on the plastic isn't usually the most prudent of things to do financially, but if you have some credit remaining on your cards then this is usually a better choice than a payday loan as credit cards, while expensive, are much cheaper than payday advances. The downside is that it's easy to build up a huge balance on which you pay interest almost indefinitely, so always plan to reduce your balance whenever you can.

Doorstep Lending

This is a kind of finance where the repayments are made in person to a collector who comes around to your home on a regular basis. It's not cheap, but it's usually cheaper than taking out repeated payday loans. There is also something of a 'loan shark' stigma attached to doorstep lending, but it's important to note that you should only borrow from reputable companies who operate fully within the law and are regulated by the Office of Fair Trading. Provident are one such company who are one of the biggest providers of this kind of finance in the UK.

Pawnbrokers

This age-old service still has a presence on most UK high streets. The idea is simple: you leave something of value with them on deposit in exchange for cash. When the time comes to repay the money, you will get your possessions back. If you can't or don't want to repay, your possessions will be sold to clear the debt. In general, this service will be cheaper than cash advances because the pawnbroker is at very little risk of being out of pocket.