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Loan alternatives
Loan Alternatives Explained

If you have a poor credit record and are unable to arrange an unsecured personal loan, here are some main loan alternatives that are on offer:

Payday Loans

Payday loans, loan alternatives, are essentially cash advance loans. This is a popular loan option for those who depend on their monthly salary for their everyday expenses. Should an unexpected emergency arise—such as repairs to the car or an urgent medical bill—securing a payday loan is a fast and easy way out of a tight financial spot. 

The amount of payday loans normally range from £100 -£1000. Most lenders require you to repay the amount borrowed in 1 to 4 weeks. This is an attractive loan alternative because lenders do not carry out credit checks. However, most lenders impose a few conditions:

  • You must live in the UK and be at least 18 years old.

  • You can be a tenant or homeowner.

  • You will need a regular monthly income.

  • You must have an active current account and a debit card.

There are, however, some downsides to payday loans:

  • Extortionate interest rates.  You may only borrow £100 but end up repaying up to £140!

  • A vicious cycle.  You may find yourself trapped every month with a shortfall unless you make sure that there is enough left in your paycheck to get you through until next payday!

Other Loan Alternatives

If you need cash urgently and are employed, there are better options than a payday loan:

  • Approach your employer for a pay advance. You might be surprised, but many employers are sympathetic—some even offer loans with low interest rates, which good be a great loan alternative.

  • Approach a credit union or a small loan company. They tend to have lower interest rates for loans.

  • Approach family and friends. Many are happy to support you by providing much-needed cash, as an alternative to loans. Be sure you pay them back by the agreed date.

  • Borrow on your credit card. Even though many credit cards have high interest rates, they can be cheaper than some payday loans, so consider this as a loan alternative!

  • If you are borrowing to repay other loans or to pay utility bills, ask for more time to repay. This might be a cheaper option than other regular bank loans, even with late fees or additional interest charges.

  • Arrange an overdraft protection on your current account. If approved, this can be an economical way to acquire more funds.

  • Arrange a pawnshop loan. You can obtain instant cash loans from pawnshops against items such as jewellery, designer watches, and other precious items. These items must carry their original box, receipt, and certificate. You can redeem your items at any time within a specified period by repaying the loan plus interest.

  • Arrange a car title loan. As these loans are secured by your car, you may pay a lower rate of interest in comparison to payday loans. Even people with bad credit history stand a good chance of qualifying for a car title loan, so consider these as loan alternatives.

  • Arrange a home equity loan. You can raise finance by releasing some of the equity tied up in your home. For instance, if your house is valued at £300,000 and you have an outstanding mortgage of £100,000, you can use the difference of £200,000 as equity to take out a loan, as a regular loan alternative.  But remember, if you fail to make repayments, you could lose your home!

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