How to Avoid Using a Payday Loan to Pay Rent

Inside Subprime: Dec 19, 2018

By Lindsay Frankel

If you’re struggling to cover the cost of rent, you’re not alone. While it’s generally suggested that renters spend no more than a third of their income on rent, Americans spend more than that on average. In fact, rent costs eat up 45 percent of Millennials’ income, and figures are even more alarming in cities with high housing costs.

If you’re late on rent, most landlords will charge a percentage of your rent as a late fee after an initial grace period. Five percent is typical, and some states place limits on what landlords can charge. To avoid this charge, cash-strapped renters may be tempted to take out a payday loan. Renters are more likely to use payday loans than homeowners. But these risky loans have annual interest rates in the triple digits, which can lead borrowers into an insurmountable cycle of debt. If you’re facing a late charge, or even eviction, there are better alternatives available.

Ask for help

If you’ve fallen on hard times financially, try talking to your landlord before rent is due. If you’ve paid your rent on time in the past, your landlord might be understanding of your situation. You can also ask family or friends for financial assistance. Or, if you have space in your residence, consider sharing the cost of rent with a roommate.

Apply for a grant

Many national charities and local nonprofit organizations have programs that provide emergency rent assistance to renters in need. These grants do not need to be paid back, so you can put your future income towards next month’s rent rather than spending money on payday loan fees. Try contacting the following organizations:

  • The Salvation Army – Apply in person at your local chapter and show proof of your financial hardship to find out if you are eligible for one-time assistance.
  • Catholic Charities – Contact Catholic Charities to speak to a case worker who can help you obtain emergency rent assistance.
  • Modest Needs – Anyone who holds a job can apply for a grant from Modest Needs, which is funded by private donors. You can request a grant online.
  • Society of St. Vincent DePaul – Visit your local branch to apply for assistance.
  • United Way – Dial 211 or visit to be directed to local charities that can help with rent assistance.

Apply for government assistance

Your state’s Local Housing Authority and Social Services offices can direct you to programs offering short-term assistance, for which you’ll need to prove financial need. But if you’re struggling to pay rent on a monthly basis, you should try to secure long term assistance, such as the Section 8 Housing Voucher Program. If your income is lower than average for your location, you may be eligible to receive monthly assistance through this program, which will cover the majority of your housing costs. You can also get on the waitlist for subsidized housing in your area, which will significantly reduce your housing costs.

Take out a lower-cost loan

If the previous options fail and you need to borrow money in order to make ends meet, seek alternatives before turning to payday loans. Credit cards have much lower interest rates than payday loans, as do personal loans and payday alternative loans from banks or credit unions. If you have bad credit or lack established credit history, consider a no credit check installment loan. With longer terms and lower interest rates, these loans are easier to pay back and help build credit, which will set you on the right path towards a healthy financial future.

For more information on payday loans, scams, and cash advances and title loans, check out our state financial guides including CaliforniaIllinoisTexasFlorida and more.