What You Need to Consider When Getting Emergency Cash

When money is tight, an emergency loan may help you keep your finances afloat. Cash advances and payday loans may seem like a good idea, but these quick fixes could have high interest rates, fees, and plenty of fine print.

To help you avoid getting into more financial hot water, AARP Foundation has rounded up everything you need to know about your options.

Cash Advances vs. Payday Loans

Cash Advances	Payday Loans
You borrow against the credit available on your credit card.	You borrow against a personal check, which is held until your next payday.
Unlike credit card purchases, you start accruing interest from the moment you borrow. Advances also have higher interest rates, plus ATM and processing fees.	At your next payday, you must pay back the amount you borrowed at a high interest rate and pay finance charges.
If you don’t repay the full amount on your first statement, the high interest rate you are charged may make repayment out of reach and max out your available credit.	If you don’t repay the loan by the due date, the lender can cash your check or electronically withdraw money from your bank account.

While you can get the cash you need quickly with a cash advance or through a payday loan, both are expensive options that could make your financial situation worse in the long run.

Even though you may tell yourself you’ll pay your cash advance back in full in time to avoid those high interest rates, that’s not a given. And payday loans? Some states don’t even allow these kinds of lenders because they prey on cash-strapped customers, charging huge interest rates ranging from 300%-500%.

Better Emergency Cash Options

So where can you get money instead? Here are some ways you can get much-needed cash, while sticking to a budget and managing your debt wisely.

Personal Loan

When you need an emergency loan, your first step should be to check with your bank. Offering lower interest rates than credit cards, personal loans allow you to borrow a fixed amount of money that you pay back in installments over a specific period of time. How much you can borrow and at what rate will vary depending on your bank and your situation.

Friends & Family

Asking someone you know personally for a loan can be tricky. On the one hand, they will most likely charge you a lower interest rate than the bank, or maybe none at all. But if you cannot repay them, it will negatively affect your relationship. Find out how to create a loan contract and get more tips here.

Payday Alternative Loans

Offered by some not-for-profit federal credit unions, payday alternative loans or PALS are what they sound like: a better option than payday loans. The rates and fees are lower than payday loans and the length of time for repayment is longer. You’ll typically need to be a member of the credit union for one month before you can apply. Membership fees are nominal, around $5. Some state-run credit unions offer similar products, so it’s worth checking what’s available near you.

Paycheck Advances

If you need money to cover an emergency expense, ask your employer if they’ll give you a paycheck advance. If this is something they’re willing to do, they’re unlikely to charge you a fee or interest. You’ll only know if you ask.

Get-Paid-Early Apps

These days, there are apps that will let you get an advance on your paycheck. While many of the apps don’t charge interest, you will have to pay a monthly membership fee. Before you go this route, be sure to compare interest rates, fees, and terms so you know what you’ll be able to afford to pay back.

Finally, as a last resort in a true emergency, you can always overdraw your checking account with your debit card. You’ll pay an overdraft fee but you won’t have to worry about paying it back at a high interest rate.