If you have a persistent problem with your payday loan debt, it could indicate that you’re in the “payday debt trap.” The cycle of debt is so severe that it can be challenging to break.
Pew Research and the Consumer Financial Protection Bureau (CFPB) show that the average annual interest rate is 396%. The average borrower pays $520 in interest and fees to borrow $375.
There are many situations to think of where money is needed urgently. This way, all bills can fall on the mat simultaneously, the tuition fees have to be paid, or there is suddenly a super good offer that is only valid today! In such cases, it would be helpful if there is a possibility to take out a loan where you still receive money today!
Borrowers of payday loans can feel trapped by these loans. You’re not the only one who has taken out a payday loan.
How to get rid of payday loan debt
1. You might consider a consolidation or debt settlement payday loan
Consolidation programs take all of your payday loan debts and combine them into one payment plan.
Two types of payday loan consolidation are available. The first is debt consolidation loans. You will be given a new loan with a higher interest rate. You can then use this loan for short-term, higher-interest loans. Payday loan consolidation programs can also be called debt relief programs, debt settlement programs, or debt consolidation programs. The amount you pay will usually be a fraction of what you owe the payday lender.
2. Prioritize high-interest loans before all else
Make sure you have all your loan documents in order. It’s a good idea that you pay off your highest interest loans in the first place. This interest payment system works this way: The more you owe, the more interest you pay.
Non-payday loans like credit card loans are better than payday loans because they have a much lower interest rate. While credit card debt is another issue, it has a lower interest rate than a payday loan.
To find out the APRs for each loan, you may need to do some research. To help you decide which loans are most important, it’s worth researching the APRs of each loan.
3. Get extended payment plans
Although payday lenders may not be your friend, they can still ask for their money back. It is possible to inquire if they offer extended payments plans. A lender might offer extended payment plans to you if they are members of CFSAA (Community Financial Services Association of America). You should ask questions before the due date of your loan. It should be no later than the last day of business. You should make sure that you understand all terms and conditions before you sign any repayment plan.
4. How to Become Debt-Free From Payday Loans
These loans are not limited to payday loans. Higher-end loans such as home equity loans (HELOCs), personal loans, or credit cards can be used for more significant amounts. Credit cards are not eligible for cash advances.
These credit bureaus require you to have at least 580 credit history. Credit Karma offers this free service. They are less likely to scam you than other credit bureaus.
5. A credit union payday option loan is available
Federal credit unions are smaller than other financial institutions. They also tend to be less profit-oriented as they don’t have shareholders.
- Issued only to borrowers who had been credit union members for at least one calendar month.
- Grants are available for amounts between $200 and $1,000
- Affordable with a maximum annual percentage of 28% and a $20 application fee, reflecting the actual cost of processing.
- In full within one to six weeks; no rollovers.
- Each PAL will be given to the borrower individually. A borrower can only receive three PALs within six months.
GreenDay Online also notes that these loans are rare; 1 in 7 credit cooperatives offer them. To find out if your credit union offers these types of reflecting-profit loans, call them.
6. Non-profit credit counseling is an option
Payday loans can be confusing. You don’t have to be in payday debt to get credit counseling. Many non-profit organizations can help you with financial planning. Many places provide credit counseling, such as credit unions and military bases. They won’t be in a position to give you a quick fix. It will also help to develop a budget that will allow for debt reduction. Avoid companies that claim to be non-profit.
The Federal Trade Commission has this article about how to choose a credit counselor.
7. Ask family and friends to help you raise money
Your family, friends, or the community can help you pay off your payday loans. Many churches and mosques offer support services through which members can anonymously donate to help fellow members.
8. Ask for a Pay Advance
Asking for an advance is possible if you have a good working relationship with your employer. Employees who have shown their worth will be granted pay advances by many employers.
Your situation is critical. Tell your employer that the faster you get paid, the less interest and fees you will have to pay. Also, mention that you will do a better job if there are fewer stressors.
You can offer to put in more hours, which will build goodwill and increase your earning potential. Consider contributing to work overtime, especially if you’re paid overtime.
9. Work overtime
Overtime pay is available to hourly workers in the United States if they work beyond the regular workweek. This usually means that you receive 1.5 times your hourly wage for every hour you work over the standard workweek, typically about 40 hours. You not only earn more but also make more per hour. It adds up quickly.
10. Do side jobs for extra cash
Many side jobs exist in today’s gig economy.
11. Payday loans should not be taken out again
This information is crucial. You should not take out a payday loan. Do your best. Make extra money, save more, borrow from family and friends, and talk to a credit counselor. Do not fall into this trap again.
Learn from the experts
Contrary to popular money-advice sites, personal finances are complex. Many of us inherit money baggage that we have inherited from our parents and our environment as children. The statistics speak for themselves. A staggering 77% feel anxious or stressed about their finances.
This shouldn’t surprise me. The education system is not good at teaching people how to understand money. Many people are doing remarkable things to reverse the trend of higher education and the free market.
Commonly asked questions
Do payday lenders allow you to negotiate better terms with your lender?
Many payday lenders are not willing to negotiate with customers. Make sure that the renegotiation does not make things worse than the original loan.
What happens when my payday loan is not paid?
This is not a good idea. Lenders may report you to credit bureaus as default and take you to court.
How can the government help me get rid of my payday loans?
There is nothing the government can do to assist payday lenders. If you require payday assistance, speak with a counselor or apply for a payday loan.
The Consumer Financial Protection Bureau (CFPB) offered information about payday loans. The government is not willing to assist.
Terminate the payday loan process
Although it can be challenging reflecting on getting out of payday debt, it is the first step to financial freedom.