Taking out a payday loan can be an attractive option when you’re in financial trouble. But it’s important to understand how they work.

Payday loans are short-term, high interest loans based on your income. They are designed to help you cover emergency expenses, but they should not be used for long-term problems.

They’re easy to get

If you look around a community, empty houses and vacant stores are a clear sign that the economy isn’t great. But if you look closer, it may become apparent that many people in that area are cash-strapped, and that they use Payday Loans Knoxville loans to get by between paychecks. Payday lenders are quick to lend, and Payday Loans Knoxville they don’t even run a credit check; instead, they take your promise to pay back the loan with your next paycheck. But their high interest rates and fees and short repayment terms make payday loans perilous.

Fortunately, there are alternatives. You can find them at credit unions, check-cashing shops and pawn shops. You can also get a paycheck advance from your employer, which allows you to borrow against future paychecks and typically has a much lower rate. And you can borrow from a friend or family member, or take a cash advance on your credit card (though you should be careful to avoid going overdrawn). You can also get debt advice from non-profit agencies around the country, which is usually free.

They’re designed for emergencies

While payday loans are often depicted as predatory loans, they can be an important short-term credit tool for borrowers facing financial crisis. However, borrowers should always consider all available options before deciding on a loan product. A better alternative to payday borrowing is a short term personal loan from a lender that provides affordable interest rates and flexible repayment terms.

Another option is to apply for a credit card with low credit requirements. Retail credit cards are usually easier to qualify for and are suitable for people with poor credit. However, they do carry high interest rates and fees, so they should be used with caution.

Finally, community assistance programs may offer grants or low-interest loans to help borrowers through a financial emergency. These programs are available in most communities and can be a great source of funding for borrowers.

They’re not for everyone

Payday loans are not for everyone and there are plenty of alternatives. Asking friends and family for help is one option, but it can be complicated as relationships are often strained by financial difficulties. Another alternative is borrowing from a bank or credit union, which typically offer lower rates than payday lenders. You can also try a paycheck advance from your employer or use apps like TaskRabbit or Rover to make money performing odd jobs such as assembling furniture, dog walking and home delivery. These options are less expensive and won’t damage your credit as much.

Finally, you should consider credit counseling and work on long term changes that will prevent the need for payday loans in the future. This could include working on a budget, building savings and setting up an emergency fund. Lastly, consider getting an overdraft protection account with your bank. This will prevent the need to get a payday loan and can save you hundreds of dollars in fees.

They’re not a good idea

Payday loans can make a bad financial situation even worse. Often they have high interest rates and short repayment periods, leading to borrowers being trapped in a cycle of debt. Plus, they don’t report to credit bureaus, so a default can ruin your credit score.

Payday Loans Santa Rosa lenders typically operate out of storefronts and offer fast cash to consumers who need a small loan to cover unexpected expenses. But they charge a very high annual percentage rate, often 391% or more.

And if you can’t pay the loan back on time, they will likely ask you to roll it over, meaning you have to borrow again in just two weeks. Depending on state laws, this can be legal, but it isn’t a good idea. Instead, consider seeking out financial counseling to help you develop a budget and start saving. Or, if you need cash, consider other sources of lending with more reasonable terms. They may be harder to find, but they will save you money in the long run.