Is There an Alternative to Direct Lender Payday Loans?

When you’re down on your luck, a payday loans direct lender may offer a helping hand. But when their loans come with high rates due back in practically no time at all, should you take it?

In an emergency, you might feel like you have no other option. When all you have are maxed out credit cards, no collateral, and bad credit to your name, you can’t qualify for the average bank loan.

Luckily, there’s another option.

Why Do People Rely on Direct Payday Lenders?

Some of the biggest financial institutions have strict eligibility requirements. They want you to have a good credit score, a decent salary, and maybe even some collateral to sweeten the deal.

The average payday loans direct lender, by comparison, doesn’t have the same standards. Some don’t even check your score!

While this may seem like a good thing to people with bad credit, skipping over this crucial step is a red flag. Financial institutions check credit as a way to assess your creditworthiness, or your ability to repay what you take out.

If they aren’t checking your score, there’s a chance they don’t care about your creditworthiness. In other words, they don’t care if you can reasonably afford to repay the cash they’re offering.

This may be problematic because of the type of products they offer. The typical cash advance comes with a triple-digit APR, and it’s due back all at once by your next payday.

If your finances are tight enough that this is your only option, its lump-sum repayment style can be a challenge to hit on time. And late payments can result in late fines, extra interest, and even damage to your credit.

Installment Loans for Bad Credit Are a Possible Alternative

When an unexpected emergency arrives when your credit and savings are low, you might want to consider applying for an installment loan to borrow what you need online. Like some direct lender payday loans, installment financial products may be available even if you have bad credit.

These lenders compare your credit score to other financial stats to see if their products are a reasonable solution to your financial emergency. Their standards might include looking at your employment history and pay schedule.

But unlike payday products, installment loans for bad credit come with longer repayment terms. Rather than paying them back in one lump sum, you may have weeks, months, or even years to repay what you owe.

This breaks up your payment into smaller chunks that take up less of your overall paycheck. With more of your earnings leftover, you might find it easier to budget your repayments with your other essential bills.

Bottom Line

No borrowing option is perfect for everyone across the board. While direct payday lenders offer a niche product for people with bad credit, they only make sense if you can guarantee you have the cash to repay it all at once.

On paper, that might be easy to do, but life can be unpredictable. If another emergency comes our way between then and now, you may not have the cash you thought you would.

An installment loan may give you more breathing space. But like any other borrowing option, it only works if the rates and terms fit your finances. Remember this the next time you need fast cash in an emergency.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.