What if you were in a financial crisis? Would you prefer to turn to your boss instead of a payday loan lender?
The 78% of Americans who live paycheck-to-paycheck can find it difficult to get money fast. Because payday loans are so convenient, many people turn to them. They also have high interest rates, rollovers and can trap many in a cycle repeating borrowing and debt.
These startups claim that they will end payday loans by solving the main reasons why people take them – to manage cash flow or cover unforeseen expenses.
Here are some facts about payday loans and emergency loans from GAD Capital
Modern Workplace Paycheques Advancement
The idea of a payday advance is not new. In fact, your workplace may already have a program that grants you access to the money that you have earned.
Earnin and PayActiv offer employees a simplified way to work that maintains the traditional two-week employer payroll cycle.
“Why can’t you access your income in realtime if we can see movies in realtime?” PayActiv founder and COO Ijaz Anwar is based out of San Jose, California.
To win based out of Palo Alto, Calif. has a mobile app which asks for your timesheet. It allows you to cash some of the money that you have earned before you get paid. A tip can be added to your regular salary.
PayActiv connects to your employer’s payroll system and offers a similar app-based services that sends earned wage to a bank or prepaid debit cards. Walmart is also a customer. The company charges employees a $ 5 membership fee, which includes three monthly withdrawals of wages. It offers financial advice as well as budgeting tools.
Anwar estimates that the typical user makes between $11 and $13 an hour and is in their 30s.
Employer offers emergency loans
HoneyBee and SalaryFinance offer small personal loans for emergency situations, usually between $ 250 to $ 3,000 via an employer’s benefit portal.
All three companies state they consider income and employment data when securing borrowers. So a low credit score will not automatically disqualify someone. Your credit score can be improved by having your payments reported to credit bureaus.
Employer-provided loans are not limited to low-income workers. Doug Farry, who founded Employee Loan Solutions, TrueConnect’s company behind, stated that cash flow problems are common for workers of all income levels.
Farry says that while the TrueConnect program was intended initially for low-income workers but is being used by many people making six-figure incomes. Comcast is a well-known customer.
These interest rates are much lower than payday loans that can reach up to 400%. TrueConnect charges 24.9% at a flat rate, HoneyBee charges a 5% up-front fee and SalaryFinance charges 11.8%. You can expect to pay your loan for a period of a few months or even a year. The monthly loan payments will be deducted from an employee’s salary.
These loans are just like any credit card – as long you make your payments on time, you will see your credit improve. You are responsible for loan repayments even if your job is lost. However, many companies offer assistance to borrowers who have lost their jobs.
Their mission is to help people manage their finances. They also provide financial education resources.
Advantages and disadvantages
Payday advances or emergency loans have the greatest advantage: they allow you to access low-cost money regardless of your credit score. They can be one of several options for payday loans, depending on your requirements. Alternative payday loans are available from lending circles, credit unions, and pawnshops.
If you are struggling with spending, low income, or have a lot of debt, these services may not be the best option. A budget is a way to plan your finances, find ways to increase your income, and pay off debt.