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You Need More Than a Cash Advance or Payday Loan—Now What?

In Hawaii, you can get a cash advance for up to $510, but you need more. Now what do you do?

We’ve all had those BIG emergency situations: You have a sudden medical need that must be taken care of now (hello, root canal!); your car needs $2,000 in repairs or it won’t be operable; or you need to replace your washer and dryer. Or maybe, because of previous unforeseen expenses, you can’t quite make this month’s rent.

Or let’s say you can’t pay off that cash advance you got last month unless you get another one. That fee of $15, $30 or $60 seems reasonable on the first advance, but these fees add up and can easily reach an APR of over 300% if you continually use this service.

Are you tempted to get more than one cash advance or get additional payday loans online? Don’t do it! You’ll only get yourself into a debt crisis that you’ll have serious problems getting out of.

If any of these examples describes your own money crisis, let’s take a look at what your options are—only you will know what works best for you and your situation.

Short-term loan:
A short-term loan is a loan amount generally from $500 on up, and can be taken for several months, all the way up to five or six years (though most are for fewer). The good news is, there are plenty of companies willing to give you a short-term loan. The bad news is, most of those have very high interest rates.

Try first with your bank or credit union, if you belong to either. You’ll be able to get a more competitive interest rate (probably between 5% and 20%). The next resource you have would be a financial services company or lending company (with interest rates between 15% and 30%); frequently they will act as a conduit between you and financial lenders.

Both banks and credit unions have federal programs specifically for short-term loans under $1,000: The FDIC launched the Small-Dollar Pilot Program in 2008; The National Credit Union instituted the Short Term Small Loan Program in 2010.

Short-term, or personal, loans can be unsecured; you just sign the paperwork and the money is yours. Or they can be secured loans; you have something of value that acts as a guarantee for the loan: savings account, real estate, etc.

If you take out a loan through a bank or credit union, you can have your payments automatically deducted from your checking account (usually you’ll receive a lower interest rate for doing so).

A loan through a bank or credit union will also improve your credit score—as long as you repay in full, and on time.

The interest rate you will be charged for your short-term loan depends on a few factors: The amount of the loan, your credit score, if you have collateral, the length of time you will take to pay back the loan, if you already have a relationship with the lender, and who you secure the loan from (banks and credit unions will have lower interest rates than lending companies).

Other options:

Personal line of credit: Again, through a bank or credit union. A line of credit is like applying for a loan and having it at the ready, before you actually need it. When you need to, you draw on it, sort of like a credit card or checking account (except that you have to pay it back!). The interest rate should be reasonable.

Credit card cash advance: If you have a credit card, this is a no-fuss, easy way to get money fast. The problem? Very high interest rates: 25% to 30%. And unless you pay it off relatively quickly, it can ding your credit score.

Secured credit card: Like the personal line of credit, this is an option you have to plan for in advance. This type of credit card requires the user to provide a cash deposit (usually between $300 and $500), which serves as collateral and determines the credit line. When you are in a bind, you can use it for part or all of your unexpected expense, or you may be able to do a cash advance.

Military Aid: If you, or a member of your family, have served in the military, you may have other options for financial aid. Military relief organizations offer grants or interest-free loans to military personnel and their immediate families. There are relief organizations for each branch of the military (The Navy Marine Corps Relief Society, for example), and state organizations (The Hawaii National Guard Family Program). SimpleFi provides low-interest short-term loans to active military and first responders.

Borrowing from family or friends: Not always the best option, but if you have a good relationship, and you pay the loan back promptly (and with a modest interest amount), it might work for you.

Borrowing from a retirement account: If you are lucky enough to have a 401-k retirement account through your employer, you may be able to borrow a portion of it—check with your employer.

Talk to your creditors: Your utility companies may be willing to accept delayed payments, freeing up that money for you to use for your emergency.

Pawn shops: If you have something of value that you won’t be needing for a while (jewelry, for example), you’ll be able to get a collateral-based loan. But check on their finance charges up front!

What to know when you apply:

Have your ID ready. You will need to provide government issued ID. You may also be asked for a recent utility statement to provide proof of residency. Make sure you know your Social Security number, and your Driver’s License (or State ID) number.

Credit check. Your credit score may very well matter. You can still find short-term loans without a credit score check, but you will pay a much higher interest rate, and the loan amount will be smaller. If it’s required, the lender will run a credit check.

You’ll need your bank account information. Frequently, lenders will prefer to direct deposit your loan into a bank account. If you don’t have a bank account, check with the lender up front to see what other options are available—they may just issue a check. Though not all lenders will want to see it, it would be good to have a recent bank statement available.

Employer verification. In some cases the lender may want to verify your employment and/or your income, either directly with your employer, or just by seeing your last paycheck stub. Have your employer contact information available. If you are unemployed but receiving benefits, have that information handy.

Email and telephone contact information. Some lenders may prefer a land-line phone number for your contact number. Use a reliable and private email address—your work email is probably not the best one to use..

Read the fine print. For some loans, you may be charged an application fee or other finance charges. Or, there may be a prepayment penalty if you pay off the loan early. Be sure to carefully examine the terms of the loan before you sign!

PayDayHawaii’s MicroCredit Cash Advance is specifically designed to tide you over until your next paycheck and is not designed for long-term credit. See our article on being a responsible and successful borrower here before you apply for any loan or cash advance. You can find more information on our MicroCredit program here.

In a perfect world, you would be well prepared for a rainy day and for unexpected expenses. But you are not alone: Recent studies have shown that 40% of Americans would have a hard time putting together $2,000 in a hurry to handle an emergency. Review your options, make sure the one you select works for you and your situation, and that you will be able to repay the loan.

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