If you’ve ever found yourself in a situation with loads of payday loan debt, this post is for you…
A payday loan refers to a short-term loan that helps you fulfill your expenses before your salary arrives. It is also known as a cash advance, salary advance, or payday advance. Although it is helpful for people who need money before their salary is credited to their account, payday loans come with high-interest rates, and sometimes people fail to pay off their debt in time, even after they get their salary.
The high interest rates and inflation are two main factors because of which people are compelled to take out payday loans, and are also unable to pay them off in time. As a result, they accrue a lot of debt over time, which causes immense mental pressure. Most people think that the best way to get out of payday loan debt is more debt, but this isn’t the case.
In this article, we will discuss how you can get out of the payday loan debt and save yourself from the stress.
Tips for Getting Out of a Payday Loan Debt
If you think you are the only one stuck with a payday loan debt, think again. Every year, more than 10 million Americans apply for a payday loan, and quite a few of them fall prey to the interest trap. Let’s have a look at the methods you can follow to ensure that you don’t fall into debt again.
Look for Debt Consolidation Programs
Debt consolidation programs, also known as debt settlement programs, are meant to merge all of your payday loans into a single payment plan, thus allowing you to pay all of your dues towards a single account. This method is quite effective, as it also reduces the overall amount that you have to pay. However, you have to be very careful while choosing a provider that offers debt consolidation because there are several scammers out there.
Debt consolidation programs can be divided into two categories. In the first one, the lender provides you with a short-term, low-interest loan to pay off all of your outstanding debts. The second one involves a consolidation program where the lender takes all of the loans and pays them periodically, while the debtor only needs to pay a monthly fee.
In both cases, the lender helps you pay off the debt quickly, which means that you can get off by paying a much lower amount. In turn, you get to pay the lenders, who provide you with flexible terms for repayment.
Pay Off High-Interest Loans First
You should start off by listing down all of your loans, especially in order of the interest, you have to pay on them. Then, you should focus on paying the high-interest loans first, which start adding up much faster as compared to the others. As you may know already, the more time you take to make payments, the more your interest will increase.
If you have gathered different types of loans, i.e. credit card, home loan, personal loan, etc., your payday loan might still have a higher interest than all of them. Therefore, you should give more preference to them and pay them off much quicker. For this step, you will have to carefully review the documentation for each loan that you have.
Request for Extended Payment Plans
Although money lenders aren’t quite flexible when it comes to taking back money from borrowers, they do understand when there is a genuine reason why you would want to avail an extended payment plan. After all, they are concerned about getting their money back with interest, so they will have to heed your requests and offer you more flexibility.
Even if you manage to secure an extended or flexible payment plan, make sure to read the terms and conditions carefully before signing on the dotted line. By understanding the entire agreement, you will be able to save yourself from any unnecessary interest charges or hidden fees.
Another thing to note is that if you opt for an extended payment plan, you might also have to pay higher interest on your payments since you are taking longer to pay off the loan.
Try to Apply for a Personal Loan
Apart from payday loans, you can also opt for a personal loan to pay off the debt you have gathered due to non-payment of payday loans. A personal loan can also be of different types, including credit card loans, home equity loans, lines of credit, or a loan designed to pay off or pay down a larger loan. You may need a good credit history for availing these types of loans, but they have a much lower interest as compared to payday loans.
Therefore, you will be able to get rid of your payday loan account faster and for a lower amount. You may also be able to use the Cash Advance feature offered by most credit cards, but that also depends on the credit history and score that you have maintained over time.
Opt for Non-Profit Credit Counseling
Credit counseling is a useful method to help you get your finances back on track, and also to help you break the cycle of debt. It features an expert on credit and personal finance who guides you through the entire repayment process. However, you might not be able to afford their charges, which is why you should look for non-profit options. These include several credit unions, colleges, universities, government bodies, and even military bases.
The experts at these non-profit credit counseling avenues aren’t any less than those who charge for their services. Moreover, they will help you understand your financial situation and also devise solutions that can quickly and safely get you out of the massive debt cycle.
Recap: How to Get Out of Payday Loan Debt
This concludes our guide on how you can get out of a payday loan debt. Although the loan is quite crushing, millions of people have to opt for it in order to meet their expenses, especially if there is an emergency. Ideally, you should steer clear of the payday loan, but if you are stuck in the loop of paying debt, there is nothing to worry about. The aforementioned steps will help you finish off your debt before time.
Lyle Solomon has considerable litigation experience as well as substantial hands-on knowledge and expertise in legal analysis and writing. Since 2003, he has been a member of the State Bar of California. In 1998, he graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, and now serves as a principal attorney for the Oak View Law Group in California. He has contributed to publications such as Entrepreneur, All Business, US Chamber, Finance Magnates, Next Avenue, and many more.