Quite a number of individuals often find themselves in a financial fix while trying to meet their expenses. These situations lead them to consider taking up loans. However, individuals that have part-time jobs and those in the middle-income category may have low credit scores making them ineligible for traditional loans from licensed lenders. That notwithstanding, there exists other alternatives for these customers. These include loans with income-based repayment plans.
With the inception of alternatives to traditional payday loans, cash-strapped customers can borrow a certain amount from lenders. These loans entail borrowing money against your next paycheck. Unlike traditional payday loans, these lenders allow their customers a fair grace period to make their repayment, making it easier for borrowers to repay and meet their other financial needs. The traditional lenders, on the other hand, require borrowers to repay their full loan amount with their next paycheck.
Before borrowing against your paycheck, it is imperative that you know that they too have their downside. For starters, you have to be able to repay the loan quickly, you cannot borrow more than you earn in a specified pay period, and you ought to have an adequate free cash flow that can enable you to cover your other financial needs. In case you are an underbanked customer, here are more alternatives that you could consider to get funding.
Utilize Personal Credit Cards
You can consider using your personal credit to get funding for your financial needs. Taking this step, however, requires a proper approach so that you may not end up borrowing money at an unreasonably high-interest rate or end up paying off the debt for a long time. Since this loan falls on the unsecured loans category, there is a probability that the interest will be relatively high.
Despite being inclined towards high-interest rates, you can use your profit projections, if the loan is intended for a business, to make up your mind. If you can get a card with a zero percent introductory interest rate, you can grab that opportunity and ensure that you repay the full value of your loan before the rates on your card rise.
Use your Personal Assets and Savings
This alternative requires you to conduct a feasibility study to ascertain that using your personal savings and assets will be lucrative. If they are, then you can go ahead and sell your assets, particularly those that you can do without at the moment. If you add up that amount with your savings, then you can be able to fund your venture.
Contact an Angel Investor
Angel investors are usually the wealthy working class or the rich and retired individuals looking for somewhere to invest. These can be quite an effective source of funding for you to be able to meet your obligations. The best part about this alternative is that each country has a set of regulations to govern their activities. For instance, the Securities and Exchange Commission guides the angel investors in the United States.
Family and Friends
This is one source of capital/funding that is often disregarded but could prove to be very viable. Consider approaching your friends or family that may have some money lying around and are interested in investing in your idea. Moreover, family and friends are more likely to be supportive of your goals, and the terms of repayment can be lenient as you set the terms of the agreement with someone you are already well acquainted to.
Peer-to-peer funding is an alternative to acquiring financial aid. This entails letting other businesses invest in your business venture. Finding willing investors is not a hard process itself as you can acquire them by applying online. Small businesses can source one to five-year loans. The loans are available from widely known businesses like Lending Club.
If you are a business owner and happen to be cash-strapped, you can always consider peer-to-peer funding. Furthermore, the option could open up your business to opportunities that you would otherwise not have uncovered yourself. This is a known source of acquiring funding for small business ventures. However, it is important for the borrower to know that the interest rates may be relatively high, ranging from 5.9 percent to 29.9 percent.