USA Today: Pay day loan alternatives are not cheap

Those who oppose payday lenders often claim that cheaper pay day loan alternatives exist. When this does apply to those individuals who have the credit to have choices, those consumers with average to less-than-average credit may find payday loan store to be more accessible. USA Today’s recent piece on payday loans alternatives is an additional sad example of the misinformation that poisons the public view. The newspaper’s musings are something a lot more than cheap.

Article Source: USA Today payday loan alternatives article is misleading by Personal Money Store

Payday loans no faxing alternatives: First try 401(k) loans

Consumers who are serious about payday loans alternatives like 401(k) loans should realize that there can be dire consequences. True, it is possible to borrow up to $ 50,000 or half of what’s with your 401(k) plan (whichever is the lesser) at an initially low interest rate with no credit check. The Money Alert reports the awful truth: you’ve to pay it all back before you can continue building your nest egg. If you are able to manage the hit to your retirement savings, go for it. You should pay back in full, without the benefit of employer matching.

Losing take home pay via payroll deduction is another pitfall of 401(k) loans. Some will swallow that, but job lost can be a bitter pill. Then you’ll only have 60 days to pay anything back or the 401(k) loan can be considered an early withdrawal. Think penalties and also the possibility of being thrown into a higher tax bracket once you report the amount of the withdrawal penalty as taxable income on your next tax return. That’ll cost you. Payday loans, on the other hand, are a proven inexpensive alternative, as outlined by the University of Michigan and the Federal Reserve. They’re also much better on a small scale than 401(k) loans.

You do not really want credit card cash advances, right?

USA Today strikes out again with this effort at exposing payday loan alternatives. Credit card cash until payday loan seems attractive (with fancy blank checks and all), but you will find major caveats. The cash til payday APR is always more than the APR for regular credit card transactions. Second, if you use an ATM to get a credit card cash until payday, you will find additional fees. It’s very significant to read the fine print with your credit card’s terms and conditions before springing for a credit card cash til payday, suggests Young Money. If you need money and want pay day alternatives, try using an installment loans instead. An payday installment loans won’t require that you pay down an entire credit card balance before getting to the advance itself.

The skinny on bank and credit union small loans

Here’s where a consumer’s credit history comes into play. USA Today trumpets these low-interest unsecured loans, but spend little time addressing the reality that most consumers don’t qualify. Pay day loans are a better choice, in that that allow credit-constrained consumers to repair credit. Those with less-than-perfect credit should explore the possibility, something the USA Today apparently neglected within the process of researching their story.

Find more info on this topic

USA Today

usatoday.com/money/perfi/columnist/block/2010-06-15-yourmoney15_ST_N.htm

The Money Alert

themoneyalert.com/401kloan.html

Young Money

youngmoney.com/credit_basics/040216_01/