3 Cheaper Alternatives to High Interest Loans, According to Creditnet.com
San Diego, Calif. (PRWEB) July 16, 2013 -- Depending on a consumer's credit score, the cost of a loan - be it a personal loan, an auto loan or even a mortgage - can be very high. Consumers with bad credit scores face an uphill battle just to get approved, and even then the high cost of interest can put such consumers in debt for years to come.
With money tight and deadlines always looming, many consumers fail to consider some of the lesser-known options available to them. Today, Creditnet.com - an online authority on a multitude of topics related to credit - released its list of 3 cheaper alternatives to high interest loans for consumers to consider.
Creditnet notes that the interest rates consumers are offered are determined by the creditor and are generally based on overall creditworthiness. Loan approval is not guaranteed, and the below options are simply the ones Creditnet has researched as the best possible alternatives to high interest payday loans.
Here are Creditnet's 3 favorite alternatives to high interest loans in 2013:
1.) Peer-to-Peer Lending
Peer-to-peer lending is a growing, non-traditional form of lending that depends on independent lenders rather than banks. As the name suggests, peer-to-peer lending takes money invested by individual peer investors willing to loan the money and passes it on to an approved applicant, who takes on the loan with interest rates that are generally much lower than those of payday loans or other high-interest alternatives.
Peer-to-peer loan marketplaces like Prosper, Lending Club and others provide two services:
A.) Peer-to-peer loans give applicants a chance to consolidate debt, refinance an auto loan, or finance a business expense at potentially lower interest rates than those offered by traditional banks.
B.) Provide investors with the opportunity to earn a higher yield of interest on money invested than that of traditional stocks, bonds, etc.
Depending on one's credit score and income, applicants on Prosper.com can see fixed rates ranging from 6.73 percent to 35.36 percent; both of which are a fraction of the rates offered by online payday loan providers, which also require a number of fees you simply won't find with peer-to-peer loans.
That said, peer-to-peer lending is not available for everyone. Consumers with bad credit scores and high debt-to-income ratios are unlikely to get approved since lenders will consider investing in such a consumer too risky.
However, for consumers interested in a loan that want to avoid the high costs of quick cash payday loans, or the time spent sitting in a banker's office, peer-to-peer lending could be an excellent - and cheaper - alternative.
2.) Zero Interest Credit Cards
First, a disclaimer about credit cards that offer zero interest in the introductory period: this is NOT free money. Consumers that consider zero percent offers as such should probably not carry a card in the first place, since this could eventually lead to high debt, which eventually carries interest if not paid off by the time the introductory period expires.
Second, zero interest credit card offers are for consumers with good to excellent credit; bad credit consumers are rarely - if ever - considered for introductory offers that last 6, 12 or even 18 months.
However, for consumers that are smart about spending and are comfortable (and determined) with paying off whatever big expense they plan on purchasing with a zero interest credit card, it's hard to argue for a better loan alternative.
Popular zero interest cards like the Citi Simplicity® Card offer no interest on purchases and balance transfers for 18 months, and give consumers the ability to pay off a big expense directly, interest-free. You won't find any personal loan deal like that, anywhere.
Of course, the limitation is that credit cards aren't necessarily cash - they're for purchases. Consumers that absolutely need cash in hand would instead be limited to a cash advance on a credit card, which carry high interest (usually just under 30 percent APR), require a fee and are only a slightly better option than high interest payday loans.
But for consumers hoping to make a big purchase with a loan, a zero interest card is as cheap an alternative available. Not only that, using a credit card - and paying it off over time - will have a positive impact on one's credit score and history, setting consumers up for higher approval rates and lower interest in the future.
Just remember to make on-time payments every month and pay down all of that debt before the interest kicks in to make the most of a zero interest credit card.
3.) Visit a Local Credit Union
Finally, Creditnet also recommends considering a loan via a local credit union as a cheaper alternative to high interest loans.
Consumers may not know this, but some credit unions - which are non-profits, as opposed to their big-bank competitors - offer payday loan alternatives for members. These aren't offered everywhere, but at the very least Creditnet recommends getting in touch with a nearby credit union to find out what sort of options they offer customers. By and large, local credit unions offer very fair rates for consumers of various credit backgrounds.
For more information on high interest loan alternatives, contact Creditnet.com Vice President Jason Bushey on Google+.
Jason Bushey, Creditnet, http://www.creditnet.com, 858-454-5900 10802, [email protected]
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