Need cash quick? Here's the alternatives to payday loans.

By Natasha Culzac

You need some cash ASAP but don't want to get a payday loan. Where else can you go? Here's some emergency alternatives.

Check out these alternatives for when you need cash quick.

Existing agreements

Call or visit your bank to see whether you can increase your overdraft limit or arrange an emergency one. It’s not advisable to use your debit card when money isn’t there - rightly or wrongly the bank will let you. However, an informal overdraft facility is extremely expensive, potentially more so than a payday loan. There are often one-off fees as well as high interest charges.

Otherwise, you can apply to increase a credit card limit. If you use an existing credit card which you don’t currently owe money on, pay off whatever you do spend by the end of the month to avoid the interest charges. If you don’t have a credit card and are thinking of applying for one, a good 0% introductory deal will help you in the short-term.

Credit unions

“You could look into borrowing from a credit union as there are no charges or penalties for repaying the loan early and there is a cap on the amount of interest they can charge – 3% a month in England, Wales and Scotland or 2% in Northern Ireland,” Bushara Awan, from the Money Advice Service, told us.

Be aware that there may be certain criteria you need to meet before being approved a short-term loan with a credit union, such as have already saved money with the one you’ve approached.

The London Mutual Credit Union has a typical APR of 42.6% on a payday loan of £400 borrowed over 30 days – this would result in you paying £12 in interest, so a total of £412. The same loan with Wonga will cost you £96 in interest. (Based on informations at 22/08/2016)

Peer-to-peer (P2P) lending

P2P loans have been around for about ten years, but they’ve recently seen a spike in interest from savers and borrowers looking to shun high street banks, for ethical or recession-related reasons. These loans essentially take out the middle man (banks) and link up those who have money with those who need it, so you borrow from everyday people rather than an establishment.

The upside for borrowers is that you can get low interest rates. P2P firms don’t have the same overheads as traditional banks (branches, staff etc) as they’re just brokers really, and these savings are passed on to the customer in the form of better APRs. Other advantages include no early repayment fee, which mainstream lenders do charge, and you can also get pre-approved without getting hard credit checked. See our article on how hard credit checks affect you.

The main disadvantage for borrowers needing emergency cash is that the shortest loan period is six months. They don’t do low interest payday-style loans, so you’ll be locked in for at least the medium-term.  See our peer-to-peer lending guide for more information.

Budgeting loans

If you’re on income-related benefits and have been for 26 weeks, you may be entitled to an interest-free loan from the government. You can borrow from £100 up to £812 depending on your circumstances. How much you get also depends on what you can pay back and what savings you already have. The loan must be repaid within 104 weeks and it must be needed for essential things such as furniture, clothes or moving costs.

An application takes 15 days to process and can be made either at the JobCentre, or by filling in and posting a government form. A decision will be based on whether you fit the criteria and is not on a first-come-first-serve basis. More info here.  Additionally, some local councils have support schemes for residents in need - check your local council to see if they have any available grants. Elsewhere there are community-based crisis loans available in Scotland, Wales and Northern Ireland

Salary advances

As cringeworthy as the conversation might be, asking your employer for an advance could actually solve your problem. A loan from your boss should be interest free and will just come out of your next paycheck.

Friends and family

Let’s face it, it’s not ideal is it? Familial cash has it’s downsides and it can really put a strain on relationships, especially if you’re unable or unwilling to pay back on time. This goes for friends, too. If you do go down this route, make sure the timescale you arrange to pay it back is based in reality rather than hope.

Top Takeaway

There’s nothing worse than finding yourself short of cash in what feels like forever before payday. Some of the quickest solutions, however, are not best in the long term and payday loans certainly fit this bill - they put a blot on your credit report and can have a huge impact on your ability to get credit in the future. It makes sense to exhaust all other options first, so try the ones above that best suit you.



By Natasha Culzac

Thanks to a journalistic career history and a childhood at Sylvia Young Theatre School, Natasha has her fingers in a few professional pies, doing her best impression of a model and actor as well as personal finance writer. Outside of work she compulsively watches BBC period dramas and constantly lies to herself that this year will be the year she learns French, once and for all.

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