Chapter 3: Safer Borrowing

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Avoiding predatory lenders is a great first step towards borrowing responsibly, but it’s not the entire journey. For people with great credit, finding a loan with favorable terms is easy. But what about people with not-so-great credit? There are options out there, even if they might be a little harder to find. Trust us, doing the extra work to apply for these loans will be well worth the hassle. And you can even apply for some of them online!

Personal Installment Loans

These are loans that give you the chance to pay back what you owe slowly over time. Some of these are amortizing, which means that every payment you make goes towards both the principal and the interest. So every time you make a payment, the amount of interest that’s accruing goes down. That means you’re saving money! If you have poor credit, these loans are still going to come with higher APRs, but in many cases, they are still much better than what you would get with a payday or title loan.

Borrowing from Friends and Family

If you’re in a bind and facing down the prospect of taking out a predatory payday or title loan, it’s always a good idea to see if someone you know could lend you the money instead. There are a lot of potential benefits to this option, including more flexible repayment terms and lower interest rates. (If you’re lucky, your friends or family might not even charge you any interest at all!) But there are also some pretty obvious downsides: failing to pay this loan back could ruin your relationship with the person who helped you. To prevent that, consider having a contract written up that outlines the terms of the loan. That way, both of you will be on the same page from day one.

Payday Alternative Loans (PAL)

These are a specific kind of loan that you can find at credit unions across the country. They were specifically created to battle predatory lending. They come with principals between $200 and $1,000, terms that range from one to six months, and APRs that are capped at 28%. These loans are offered by credit unions that belong to the National Credit Union Administration (NCUA).11 However, this also means that you must have been a member of that credit union for at least one month before you will qualify for the loan. These can be a great option, but they are not available to everyone.

Payroll Advance

If you are in good standing with your employer, you might be able to get an advance on your next paycheck. This simply means that they could give you part of what you are owed ahead of schedule. The great thing about this option is that these advances come with either low interest or no interest, but they typically must be paid back with your next paycheck. You should also make sure to only use this option sparingly because use (or overuse) could damage your relationship with your employer.

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