Just about everyone finds themselves unable to pay a bill at some point. If you’re behind the eight ball you may turn to a payday loan to cover the gap. While this type of loan is convenient, payday lenders typically charge an exorbitant amount of interest and fees. If you can’t pay the money back in time, a $500 loan could quickly snowball into $5,000 as the interest piles up. But there are other options.
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BillFloat offers a less expensive option for consumers who need a little extra time to pay.
How It Works
Getting started with BillFloat is relatively easy. You go to the sign up page and enter some basic information about the bill you want to pay, including the biller’s name, the amount due, when you want to schedule a payment and your account number. The types of bills you can pay through BillFloat include utilities like gas, electric and water; cable and satellite service; wireless and landline telephone service; insurance; auto loans; sanitation; and HOA fees.
On the next screen, you’ll enter your personal information, including your name and Social Security number as well your bank account number and routing number. BillFloat uses this information to verify your identity but there’s no credit check to sign up for service. Once you’ve got all your information entered, BillFloat will give you a bill payment summary and a repayment summary.
The bill payment summary shows how much BillFloat will pay on your behalf, when the bill will be paid and what the service fee is. The amount of the fee typically depends on the amount of the bill. The repayment summary shows how much was “floated” to pay your bill, how much interest you’ll have to pay and what the total repayment amount is. Floated payments have to be repaid within 30 days and first-time users can only float bills up to $200. Once you establish a positive repayment history, BillFloat will extend you more credit to float bills and reduce your fees.
BillFloat vs. Payday Loans
There are some key differences between BillFloat and a traditional payday loan. First, BillFloat doesn’t loan the money to you directly; instead, they send it straight to the biller. You don’t have to commit money from your next paycheck to repay the loan but you do have to pay it back within the 30-day period to avoid a $10 late fee. Unlike payday loans, a BillFloat loan can’t be renewed or rolled over.
In terms of the interest rate, BillFloat is at the lower end of the scale compared to payday loans. The maximum APR you’ll pay for a loan through BillFloat is 36%, not including the service fee. With a payday loan, you could be paying anywhere from 300% to 700% interest, which can make it extremely difficult to pay the money back if you end up rolling the loan over. Payday loans typically need to be repaid within two weeks which means you have less time to get caught up.
BillFloat is designed to help you get caught up on your bills. But you can only use the service for certain types of accounts. If the biller you need to pay isn’t one of the estimated 3,500 that BillFloat partners with, you’ll have to find another way to cover the payment. With a payday loan, you’re not limited as to how you use the money.
Is It Worth It?
If a payday loan is your only other choice, then using BillFloat instead makes sense since the fees and interest are much lower. Your bills will get paid on time and you’ll have a decent amount of time to pay the money back. However, you’ll still be paying more to use the service than you would if you took out a short-term loan or line of credit from a traditional bank or credit union. The bottom line is that you should weigh all of your options carefully to make sure that you’re choosing the least expensive way to borrow when you’re strapped for cash.
Photo Credit: taberandrew