Alternatives to payday loans

Payday loans can be an option to pay bills when in a crisis, but families should look into alternatives first. There are several ways to get cash in an emergency from other lenders, and the interest rate is often lower than what is provided by a payday lender. More information on government schemes, credit unions, council loans, and other alternatives are below.

There have been a number of regulations put into place by the Financial Conduct Authority (FCA) and the government agency would rather people use alternatives such as a credit union for borrowing money. The FCA now ensure that borrowers have more information on the interest rates that may be due for using a payday loan, there are caps on rates, and affordability checks that need to take place. There are also regulations on advertising and rules to prevent payday lenders from targeting vulnerable people.

While the FCA does have more regulations to protect families, and this may make a payday loan more affordable, the borrower should still look into all alternatives first. Only when that that has been done should a high priced lender be used to pay living expenses.

There are hundreds of not for profit credit unions across the UK and over 1 millions people use their financial services. These cooperatives allow members to borrow money at a much lower interest rate, so they are great alternatives to a payday loan. All of the profits go to reduce interest rates and provide financial services to their members.

Not only will the fees and interest rate be much lower than a payday lender, but a credit union offers many other financial services as an alternative as well. The professionals will give advice to their members on budgeting. They also allow clients to open a saving or check account, or even apply for an affordable mortgage. Another use of their services can be to pay down, or consolidate debts, and this can help an individual with poor credit get back on track.

Clients can often borrow up to £3,000 from a credit union, but this amount will vary based on the location, applicant’s income, and other scenarios. So the amount of money provided to a family for paying their bills can be as much, if not more, than a payday loan company. It will also come with a lower interest rate, and thus is a great alternative. Find credit unions.

Many local Councils also offer payday loan alternatives as well. When available, these will only be for an alternative to using a high priced lender for families that are local to that town, borough or city. A council will normally partner with a local credit union or bank on running these programmes, and there will be restrictions in place.

The council loans can be used as a source of cash when the person has no other options available. Maybe they do not qualify for any other safety net schemes, or the bill they need to pay is unexpected. No matter the reason, the local authorities may be able to provide the money the family needs to help them with solving their emergency. There are over 10 councils that provide loans to needy families.

There are other council schemes as well. Loans may also be provided from emergency benefit or welfare schemes. These programmes use government funds and the money (or vouchers issued) can be used for many needs. There are almost 100 councils across the England, Scotland, Wales, and Northern Ireland that offer these be-benefits to the low income in their area. While not every agency will offer cash to the applicant, they should be looked into as an alternative to a payday loan.

Charities, not for profits, and other organisations may also offer alternatives to a payday lender. This assistance is often in the form of a grant or in-kind goods. There are dozens of these programmes across the UK. Each has their own application process and focus. Some help the disabled with paying their bills, other helps seniors, children, or the sick. Or a voucher can serve as an alternative as it can be used to pay for clothes, food, medical equipment, and more. For more information on using one of these services instead of a payday loan, find financial help from grants.