Payday Loans and Other Short-Term Loan Options

For those in need of a short-term loan, a payday loan might seem like the best option, and for many people, these payday cash advances might be the best solution.

However, there are several ways to secure short-term financial assistance. Before deciding on one particular option, it is smart to examine all of your options carefully to ensure that you choose the best one for your needs.

Option 1: Payday Loans

Payday loans are short-term loans that require repayment within 14 to 31 days. Unlike longer-term loans, payday loans typically need to be repaid at one time in one lump sum.

To secure a payday loan, a borrower must have an active checking or savings account. The borrower also must have some form of income, either through employment or a government program, and must be at least 18 years old.

Payday loans are available through physical payday loan stores or via the Internet. With online payday loans, the borrower is able to have the funds directly deposited in his or her bank account - an added convenience.

Payday loans do come with some strings - the interest associated with these types of loans is much higher than the interest rates for other types of loans. Starting around 400 percent, payday loan APRs (annual percentage rates) can increase even further if the borrower is not careful and does not repay the loan by the original due date.

Option 2: Credit Card Cash Advances

Another way to obtain a short-term loan is a credit card advance. If you have a credit card, chances are that credit card offers a cash advance option.

Typically, you can secure a credit card cash advance by calling your credit card company directly, plus many credit cards also make it possible for credit cardholders to request a cash advance via the credit card's web site.

Credit card cash advances can be repaid in a similar fashion as other credit card charges - you can elect to make the minimum monthly payment assessed by the credit card or you can make larger payments in order to pay off the debt quickly and accrue less interest.

Unless you are taking advantage of a special offer, the interest rates for credit card cash advances typically are higher than they are for regular purchases. Additionally, most credit cards will apply payments toward the balance with the lowest interest rate first, so if you are not careful, you could have a cash advance balance sitting with a high interest rate for an extended period of time.

The best approach to securing a credit card cash advance is to use a credit card that does not have a balance already and then do your best to avoid using that card again until the cash advance balance is paid off.

Option 3: Unsecured Personal Loans

A third way in which to address a short-term financial need is an unsecured personal loan.

These types of loans are similar to standard loans, but often come with a shorter repayment period. These types of loans also come with higher interest rates, but if you know up front that you will not be able to repay your loan within two or four weeks or even four months, an unsecured personal loan might be the way to go.

If you are unable to repay a payday loan within the repayment period, the finance charges will begin piling up. For a credit card cash advance, it can be difficult to avoid using the credit card for an extended period of time while trying to repay the debt. For these reasons, an unsecured personal loan will cost you less in the long run if you need more than a few weeks or few months to pay off the debt.