Personal loans provide fast, unsecured funds to cover anything from home repairs to medical emergencies. Many lenders don’t require collateral like a home or car, preferring applicants with good credit and a high income.
But what if you don’t meet the lender’s requirements?people who won’t Eligible for Personal Loans There are alternatives to predatory lenders with high interest rates. These options can help bridge the income gap, but each option has pros and cons.
1. Try non-borrowing options
See if you can raise money by making room in your budget and withdrawing some extra cash, says Tania Brown, a certified financial planner and financial coach in the Atlanta area. Review your budget for any expenses you can cut, even temporarily, like dining out or streaming services.
To save on existing bills, ask your billing company, creditor or doctor’s office if they offer interest-free payment plans, she said.
In the end, Brown said, the couple cut their expenses by earning extra income through side businesses like carpooling or selling things they no longer needed.
2. Borrow money from family members
If you’re willing to ask your family for money, it can be one of your cheapest borrowing options. It does not involve a credit check or credit report, but may require additional planning.
When you ask the question, bring a “game plan” with it that includes the loan amount, interest rate and repayment period to take the guesswork out of decision-making, Brown said. For small loans, informal loan documents between you and the lender are sufficient. Larger loans may require a formal agreement.
Ideally, a lawyer would draft a formal loan document that both of you sign, says Philip Morck, CFP in Tulsa, Oklahoma. You may have to pay for your attorney’s time.
home loan Mork said there could be tax implications, so research is also being done when drafting loan agreements. For larger loans or more complex issues, consult a tax professional.
3. Break up bulk purchases
“Buy now, pay later” payment plans can ease the stress of large purchases by splitting them into multiple smaller payments. BNPL plans, available at most major retailers, can cushion the financial blow of a new mattress or computer, for example.
Buy now, pay later Kristian Brennon, an accredited financial advisor in Kansas City, Missouri, says it’s an easy, quick option because there’s no rigorous credit check or lengthy application process.
Since the BNPL provider automatically withdraws installments directly from your account, she recommends setting reminders for payment due dates and making sure your account is not overdrawn.
4. Get cash advances
Cash advance apps like Earnin and Dave offer quick inflows of a few hundred dollars, no credit checks, and lower fees than payday loans. But like payday lenders, these apps require access to users’ bank accounts to withdraw repayments on the next payday.
Although convenient, cash advance app They should be used sparingly, as they can be difficult to budget, Brown said. The amount you borrow today will leave such a big hole in your next paycheck, so she recommends anticipating that gap before borrowing.
“Make sure you’re getting exactly the amount you need and you’re making a plan for how you’re going to pay it off,” she said.
Build savings over time
Savings are an interest-free way to cover emergencies and discretionary expenses. Mock recommends saving for three to six months, but even a few hundred dollars in savings will help cover most unexpected expenses.
If you need help building your savings each month, Brennon recommends seeking professional help through the Association for Financial Counseling and Planning Education. It offers free consultations to the public until mid-December.
List your upcoming expenses — like Halloween costumes and holiday gifts — and budget for them in advance, Brown says. This way, your savings can be set aside for unexpected expenses or income gaps.
“Life will always have its ups and downs, and the key is learning how to manage,” she said. “It helps turn a crisis into a nasty inconvenience.”
This article was written by NerdWallet and originally published by The Associated Press.