Payday loan alternatives include short term loans from a credit union, small bank loans, and getting a cash advance from a credit card.
As payday lending industry has grown in the United States, in the UK,
and elsewhere since the early 1990s, the need for competing products
has risen at the same time, to offer cheaper alternatives.
One of these emerging alternative sources, especially in the U.S., is credit unions, which have been providing short-term cash advance alternatives at least since 2001, with the North Carolina State Employees' Credit Union being one of the pioneers.
These credit unions have been capping the maximum interest rates on their member's payday loans, but often there are other requirements to the loan, including an associated savings program.
In similar ways, the cash advance marketplace has also seen a few nonprofit payday lenders, such as Grace Period, which operates in Pittsburgh, which loans out money similarly to payday lenders, but with much more relaxed repayment terms and with an associated saving program.
Another source for alternative short-term funds has been in recent years the traditional banking industry.
The banks' interest in small-dollar amount, short-term loans was ignited by the Federal Deposit Insurance Corp (FDIC) program called "Small-Dollar Loan Pilot Program" in 2008, which was designed to provide banks a way to profitably compete with the payday lending industry.
Even though the 2-year program has ended, many banks have continued to provide products that compete with the cash advance market, including such alternatives such as overdraft protection.
For many, taking a cash advance from a credit card is the easiest way to fund short-term shortfalls in personal finances.
The only problem with this route is that the APR rates on credit card cash advances are often very high, but may be competitive to similar sums taken as payday loans.
Cash advances should be used for short-term financial needs only, not as a long-term financial solution.
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