Escaping Financial Crisis

Many consumers look to payday loans to deliver them from financial crisis. Consider all of the alternatives before you make the payday leap.

The Rollover: A Political Issue?

Financial experts usually strongly advise consumers to exhaust all other alternatives before they turn to urgent cash loans. Why? Because it is almost inevitable that if money is tight now, it will still be tight when your next paycheck comes in. Consequently, you will have to roll the loan over, as almost all payday loan borrowers do, and you'll bury yourself in fees. In fact, the roll-over option on payday loans has become such a bane to consumers that some activists are calling for legislation that bans the practice. If legislators pass such a reform, consumers would have to pay the cash loan on the original due date and could not extend it for more time and additional fees.

Other Options

If you're in financial crisis, a visit to a payday lender might make matters worse if you don't first consider all of your alternatives. Here are some things you can do instead of borrowing an urgent cash loan:

• Get another job or sign up for extra hours at your current job
• Sell some things you don't need anymore at a garage sale or on eBay or Craig's List
• See if your employer will give you an advance on your paycheck
• Look into a cash advance on your credit card (this will still have very high interest rates and is quite risky, but less so than a payday loan)
• If you are a member of the military, get in touch with your branch's aid or relief society for financial assistance. Every branch has some variation of this type of program.
• If you are a civilian, get in touch with your church, other faith-based organizations, or your local social services department
• Go to your local food bank
• If poor budgeting skills or credit card debt is your problem, you might want to enlist the help of a professional, accredited credit counselor. Look for a counselor who works for a nonprofit agency.

Get $500 in the Bank

So much high-interest borrowing could be avoided when financial crisis strikes if people would only aim to keep $500 in the bank at all times. A good way to begin is to keep a $100 cushion in your checking account. This way, you can avoid overdraft fees and give yourself some leeway. Next, transfer $400 from your checking account into savings. Though $500 is a relatively small amount, it will cover most financial emergencies that come your way, such as car repairs, broken appliances, etc.