What is the Best Alternative to a Payday Loan
                     W H A T I S T H EB E S T  A 
L T E R N A T I V E T O A  
P A Y D A Y L O  A N ?
B Y L E V E L F I N A N C  I N 
G

Payday loans have seen their popularity increase steadily 
in  recent years. This form of short-term loan allows you to 
 borrow an amount equal to a portion of your paycheck. 
You  must then repay it in one lump sum payment, usually 
within  two weeks.
A recent report by The Pew Charitable Trust focused on 
why  many Americans resort to this form of credit. Contrary 
to  what many believe, only 16% of borrowers use payday  
lending for emergency expenses. The majority (69%) take  
out these loans to cover basic monthly costs, like food,  
mortgage payments, and credit card bills.
A payday lender is usually a small merchant operating  
through a physical store or website. How much you can 
 borrow depends on your pay stub, which you must 
show  when you first apply.
Additionally, payday loans are unsecured, meaning they  
don’t require any collateral. In some cases, you don’t even 
 need a bank account to apply for them. This, and the 
fact  that lenders rarely run credit checks on borrowers, is 
what  makes them so attractive to many.
Very High Interest Rates And Fees
A negative aspect of these loan offers is the very high 
interest  rate charged by lenders. This is partly due to the  
aforementioned lack of collateral and credit checks.
As if it wasn’t enough, fees can be considerably high too,  
averaging $15 for a $100 loan. According to Investopedia, the 
 average APR on these loans is a shocking 400%  and can be 
as  high as 780% in certain cases.
A payday lender uses exemptions and loopholes to bypass 
usury  laws aimed at limiting high interest rates. This means 
that they  can only be regulated by targeted legislation. Here is 
the current  legal situation with regard to payday loans.
Outlawed in Arizona, Arkansas, Colorado, Connecticut, 
District  of Columbia, Georgia, Maryland, Massachusetts, 
Montana,  New Hampshire, New Jersey, New York, North 
Carolina,  Pennsylvania, South Dakota, Vermont, and West 
Virginia.
Some protection is offered in Maine, New Mexico, 
Ohio,  Oklahoma, Oregon, Virginia, and Washington.
No protection is offered in all other states.
The high charges and lack of credit checks are the reason  
why many observers consider payday loans a form of  
predatory lending. Many borrowers end up taking out a 
new  payday loan just to cover the cost of the previous 
one.
Indeed, the National Consumer Law Center confirms that 
76%  of payday loan volume is used to repay previous ones. 
Some  even claim that they are designed by lenders to be a 
debt  trap.
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