5 Alternatives for Payday Loans With Low Interest

What do you mean I get to pay $30 for every $100 I borrow, summing up to 400% in APR for payday loans? That might be ridiculous to consider for some.

But what other choices do you have when you need urgent cash before your salary comes in? 

Several low-interest loan options can suffice in place of payday loans. This article will centre on these alternatives so you can get payday loans with low interest!

What this article covers:

Why Consider a Payday Loan Alternative?

Online quick cash payday loans offer fast access to money. However, there are a few downsides to taking them. Below, we’ll highlight a few reasons you can consider as alternatives to payday loans in Australia. 

payday loans low interest

High-Interest Rates

Several payday lenders offer rates that are almost impossible to repay. And since they have fixed interest, you might not notice you’re paying that much. 

For instance, you can pay as much as $30 for a $100 payday loan with a direct lender, which can work up to 400% APR.

Considering the nature of payday loans, there are also high chances of falling into the hands of loan sharks. They offer very small payday loans but commit you to pay high-interest rates that the Australian Securities and Investments Commission (ASIC) doesn’t regulate.

Short-Repayment Duration

Since paychecks usually come biweekly or monthly, payday loans have a maturity date of two to four weeks. In addition, you’ll have to repay in one lump sum, as instalment payments aren’t allowed. 

Considering these conditions, repaying within the given period can be challenging. Hence, this can force you to take on more debt to settle the previous one. 

The lender might also include a penalty fee on your debt if you can’t meet the deadline or have an issue with your checking account. However, you can prevent this by informing them and negotiating a new payment plan. 

online payment loans

Potentially Enter a Debt Cycle 

A debt cycle refers to repaying multiple debts by taking out a new loan.

Payday lenders don’t check for credit licenses or documents, making it easy to get a loan. They also promise 24/7 payday loans, which means you can get them at any hour of the day. 

Unlike conventional loans from banks, the nature of payday loans provides a fertile ground for taking on more debt than one can pay. This can lead to debt accumulation and potentially entering into a debt cycle. 

Payday Loan Alternatives With Low Interest

There are several alternatives for payday loans with low rates. We’ll highlight five of them below: 

1. Loan Apps

Loan apps have better loan offers you can use to take out a 1-month loan without stress. The best part is that you can conveniently take out 24hr payday loans. 

Compared to payday loans, several loan apps offer interest-free loans for small amounts. For instance, you can get an interest-free loan when you take on debt below $500. 

Even with loan apps that charge interest, you still pay less than payday loans. On average, you can pay from 24% to 30% monthly, less than 300% APR. 

pay loan online

How to Get Loans from a Loan App

You can get small-day loans in your account in minutes using a loan app. Here’s how: 

  • Download the official mobile app. You can get a link to download any loan app from its official website. However, ensure the app is legit and licensed with the ASIC. 
  • Create a profile for free.
  • Submit all requested data to complete the profile. 
  • Depending on the app, you might have to check your eligibility before applying to borrow. 
  • Apply for a loan.
  • Receive money in your app wallet. You can transfer the cash from there to your bank account. 

2. Online Banks 

Online banks operate like brick-and-mortar banks but with full internet operations. They also offer personal loans that stand as better alternatives to payday loans. 

You can take out small personal loans from your favourite online bank compared to payday loans. While they might check your credit score, you’ll enjoy low-interest rate payday loans with an APR of 10% to 20%. 

You also have the option to apply for higher loan amounts and repay them over a longer period. Some online banks give you the option to pay with installation. 

long term payday loan

How to Get Loans from an Online Bank 

Online banks have different processes for taking out a loan. Some lenders require you to be an existing customer for at least six months before being eligible for a loan. 

Regardless of the process, these few steps can help you land unsecured payday loans from any online bank. 

  • Find a reliable online bank.
  • Open an account.
  • Complete your online profile and link your traditional bank account.
  • Use the service actively for at least a month.
  • Check your eligibility status.
  • Follow the details on the site to apply for a loan.

3. Credit Card Advances

You can take out loans using your credit card. Like payday loans, getting approved is fast and easy. You’re one step closer to getting a loan when you have a credit card.

One good thing about credit card advances is their low-interest rates. Besides flat fees, you can expect to pay 24% in APR. 

Additionally, the payment duration is flexible. You can extend payments as you wish.

How to Get Loans from Your Credit Card

It is simple to obtain a low APR loan through your credit card. Here’s how:

  • Get a credit card from a reliable issuer. 
  • Understand the issuer’s terms, like your daily, weekly, or monthly limits. 
  • Learn about how much interest you’ll pay. 
  • Use the card for regular transactions (if you’re a new user) to gain credit eligibility. 
  • Apply for a PIN once you’re eligible to use your credit line. 
  • Use your card to make online payments or to withdraw cash from ATMs by entering your PIN. 

long term payday loans

4. Buy Now, Pay Later (BNPL) 

Buy Now, Pay Later is one of the latest inclusions in the personal finance space. However, it is now available on the majority of e-commerce platforms. This alternative might be best if you intend to take out a pay loan online for shopping. 

BNPL providers offer low-interest rates for loans, depending on the payment plan. 

For instance, if you’re ordering goods worth $500, you can have the option to pay in two to four instalments using a BNPL platform. You can expect to pay between 2% and 8% on each loan, up to an APR of 30%.

How to Use a Buy Now, Pay Later Platform

You can use the BNPL option on e-commerce platforms that integrate it. Here’s how to use one: 

  • Purchase goods from an online participating retailer. 
  • Choose the BNPL option at checkout.
  • Enter your details with the BNPL service for verification. 
  • After verification, pay a percentage of the purchase amount. In some cases, it can be up to 30%.
  • Your loan will be approved if everything fits. 
  • Pay your debt according to your plan using bank transfers, checks, or automated payments. 

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5. Social Lending Platforms

Social lending platforms are communities that connect borrowers and lenders under a community-regulated guideline. Here, borrowers can contact lenders directly and apply for loan offers. 

While the platform allows lenders to choose their interest rates, the community guidelines keep them in check to ensure they’re affordable for community members on the other side of the bargain. 

You can expect to pay interest rates of at least 12% to 22% on social lending platforms, which is lower than payday loans. 

With social lending, you can take out loans from multiple lenders, depending on the restrictions on your profile. You can increase your loan limit when you obey community principles and repay your loans on time. 

How to Take Loans from a Social Lending Platform 

You can follow these steps to take loans from a social lending platform: 

  • Sign up with a reliable social lending platform. 
  • Complete a borrower’s profile by entering the necessary information required. 
  • Check the limits on your profile. 
  • Apply for small loans.
  • Repay loans on time to qualify for more offers. 

small pay day loan

Conclusion

If you need a loan before the month’s end but are worried about paying high-interest rates, there are several sources offering alternatives to get payday loans with low interest. Some include loan apps, BNPL platforms, social lending sites, online banks, and credit card advances. You can expect to pay less than 300% APR with these platforms.

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