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3 Ways to Make the Most of a Payroll Loan

Sometimes you might have important bills that just can’t wait for payroll. In this case, it might be tempting to use a payroll loan to access cash quickly and conveniently. While most financial experts would advise people to use this kind of loan only if it’s absolutely necessary, there may be times when you have to take one out. Here are three ways to make the most of your payroll loan while also looking at other ways to access cash.

The basics of payroll loans

Payroll loans offer unsecured and short-term financing. This kind of loan seldom offers to loan more than $1,000 to $1,500. The due date for the loan and fees is usually within two weeks. These loans are intended to tide the borrower over until their next paycheck.

A loan like this could come in handy if the borrower needs to make any unexpected charges. Typically, the borrower just needs to have a checking account. Funds may be sent to this account, which is also where the lender draws funds for repayment.

Before considering taking out payroll loans, it’s important to understand a few things about them:

  • The fees attached to these loans are usually quite high, and they may translate into an APR in the range of 15 to 30 percent or even more.
  • Payroll lenders may extend the due date, but they will charge additional fees for this privilege.
  • These loans can usually get approved and funded on the spot.
  • Payroll lenders don’t check your credit scores.

3 tips to help you use payroll loans prudently

If you have an urgent need for modest amounts of cash, look into visiting a payroll lender. These tips can help you find the best one for your needs:

  1. Shop around: Most communities have several payroll lenders, which you can find online. Look at the different fees and repayment terms to find lenders with the best rates.
  2. Check reviews: If you decide to use a local or online payroll lender, check review sites like the Better Business Bureau. Reviews help you see the unfiltered good and the bad of lenders from customers themselves.
  3. Plan to repay promptly: If you need to defer your payment date, you’ll likely have to pay a fee. The more fees, the longer it takes to pay back these loans. Make sure you pay on time.

Why consider alternatives to payroll loans?

Payroll loans are good for small sums of cash that you can pay back quickly and on-time. Be aware, though, that they usually come with higher fees and not to make a habit of relying on these loans.

However, if you have a good credit score and a need for a large amount of money, look into other options such as small business loans, lines of credit and traditional loans. However, if you need a larger amount but have a low score, where can you turn to?

Online lending platforms can offer your longer payment terms with lower fees. They don’t check credit scores and instead focus on other data sources, including checking accounts or online payment processors (like PayPal). With these lenders, you might be able to borrow up to $100,000 and can ask for loans as small as $2,000. Fees are generally transparent and much more modest than average fees from payroll lenders. In addition, you should have from several months to a year to repay your loan and fees.

Funding your small business can be challenging but not impossible. Shop around and see which options work best for you and your company.

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Kabbage Team

The Kabbage Team is here to not only fund the small business loans you need, but to help you grow your business through free marketing tips, webinars, tools and more. Is there something you'd like us to cover or want to get your small business featured on our blog? Send us a note at content@kabbage.com.

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