The Covid-19 pandemic has reduced the income of a large number of people, making it difficult to keep up with the monthly expenses. This has pushed many to borrow money from banks and other lenders, and the most accessible type of loan that employees can get is a payday loan. These enable individuals to borrow money in a matter of minutes and use it however they see fit. Depending on the lender, the loan usually has to be repaid in a certain amount of time (usually 30 days). From a functional perspective, payday loans can be extremely useful, however, they have two big flaws.

First of all, payday loans come with high-interest rates that may add to the financial difficulties that an individual is going through. Secondly, using them too often can wreak havoc on your credit rating because lenders will conclude that you are dependent on the loans to get through the month.

This having been said, there are great alternatives to payday loans, provided that you know where to look and how to use them. Here are the best ones that are currently available:

1. P2P Lending Platforms

P2P lending platforms are websites that put lenders and borrowers in contact with one another. The platforms themselves only take a small commission and oversee the deals to ensure that all parties involved stick to the terms that they agreed upon. Borrowing small amounts of money through these platforms is not difficult and the loan is usually given in under one week, making it great for planned expenses such as rent or utility bills.

• Online Lending Services

Online lending services such as Cobra, work similarly to banks, however, they do not report their activity to any of the national credit registers, which means that borrowing money from them will not affect an individual’s credit rating. The downside with them is that they have relatively high-interest rates, making them useful only in case of an emergency.

• Lending Apps

Lending apps take borrowing money to a whole new level. Once an individual installs and registers on one of these apps, he can get micro-loans in a matter of minutes. In most cases, creating the account will only require proof of identity, proof of residence, and a bank statement in order to link the app to the user’s bank account.

• Local Credit Unions

Local credit unions are often created in small towns or are built around large workplaces such as factories. Their services are only offered to the individuals that share a common link to the people that are part of it. For example, if a credit union is started by the employees of a large company, they may choose to only give out loans to other employees from the same workplace.

• Lines of Credit

Most people do not think about the advantages of getting a line of credit, or a HELOC, when they are going through a period of financial instability, however, these forms of debt are much more useful and affordable than any type of loan. They give individuals access to large amounts of money, however, the borrowers only pay interest from what they withdraw from the account. This can make them great for individuals who need to pay the rent or their utility bills a few weeks before they get their salary.

Please keep in mind that using the 4 alternatives that have been included in this list will not have any effect on your credit rating. The loans will not be marked in your permanent financial files. However, not repaying them may lead to legal issues.

The ongoing Covid-19 pandemic has led to many people having their income reduced. Furthermore, a large number of individuals have even lost their jobs with no prospect for the future. Regardless of how much money an individual has set aside, there may come a time when you will need to borrow money from a bank. The good part is that banks and other private lenders are currently offering dozens of deals to choose from. This having been said, variety is usually good, but in this situation, it can be confusing. While the lenders do market their products through commercials and online ads, most do not explain what kind of deals they are offering. To make things a bit clearer, we will look at the main types of loans that an individual can access:

1. Personal Loans

Personal loans are some of the most popular types of debt in the world. They can be secured or unsecured and enable individuals to borrow relatively large amounts of money. There are no restrictions on what the borrower can do with the money, and almost all lenders offer them. As with any type of loan, the interest rate is usually based on the borrower’s credit rating.

• Small Business Loans

Small business loans are secured loans that are given only to small businesses that provide the lender with a well-prepared business plan. Once the plan has been reviewed, the terms and conditions are established and offered to the borrower. When it comes to these loans, it is important to keep in mind that lenders may require the lender to offer a personal guarantee as collateral for the loan. This usually happens when the company does not yet have enough properties to offer as collateral for the loan.

• Home Equity Loans

These types of loans are always secured and require a special type of collateral, namely the borrower’s equity in his home. The value to the loan is established depending on the value of the collateral that the borrower offers and the term is similar to that of personal loans. The main advantage of Home Equity Loans over Personal Loans is that the former can be used to borrow considerably larger amounts of money. They are great for large expenses such as purchasing a new car or paying for an expensive medical procedure.

• Lines of Credit

Lines of credit are different from loans, but similar to credit cards. When a borrower applies for a line of credit, he will be given access to a bank account that will contain a set amount of money. He has access to the whole amount, however, he only pays interest for the amount that he uses. Lines of credit are usually great for home renovation projects or other situations where the final cost of a product or service cannot be established.

• Home Equity Lines of Credit, or HELOCs

HELOCs are lines of credit that use the borrower’s home equity as collateral. They have low-interest rates, long terms, and very high values.

• Payday Loans

Payday loans come in a wide variety of shapes and sizes. Almost every lender offers this type of loan but markets it under a different name. These are micro-loans that allow individuals to borrow relatively small amounts of money for a period of up to 30 days. Getting a payday loan often takes under 60 minutes (some lenders offer them through cashpoints), however, they have high-interest rates.

These are the main types of bank-related loans that individuals have access to. While many online-based services enable people to borrow money, they operate in a grey area and the transactions are not reported to credit registers. This means that getting a loan from them will not help build up your credit rating. Young adults and individuals who do not yet have a good credit financial history are advised to borrow money from banks rather than from other sources. This will enable them to build up their credit score and have a good relationship with lenders.