The convenience and speed of payday loans attract many borrowers when they are hit with a financial emergency. Payday loans are especially attractive to those who have poor or bad credit and who cannot get a loan elsewhere. However, as people quickly learn, payday loans are not the solution they seem to be. Yes, you will sign relatively little paperwork and leave with the money you need.
The problem, though, is that if you miss a payment, that already high interest rate can skyrocket into the triple digits. Then you will face the struggle of paying it off and perhaps other loans as well. If you find yourself in this financial dilemma, there are some practical ways for paying off debt that will lead out of the hole and to firm ground, where those debts will finally be behind you.
Prioritize High-Interest Loans First
It’s not pleasant to look at interest rates, but understanding what you’re paying is an important first step to getting out of debt. Take a look at the fine print on your paperwork and evaluate which debt has the highest interest rate. That’s the one you want to tackle first because it’s accumulating the most debt at the fastest speed. Once you pay that debt off, then you can concentrate on the next one with the highest interest rate.
Ask for Extended Payment Plans
An extended payment plan may be helpful to you because it will allow you to pay off your debt over a longer period of time, and this can potentially bring down your monthly payments. This can be useful if you have an installment loan, typically made for the purchases of cars or mortgages. Remember, however, to look at the terms of the extended payment plan and see if the interest rate will be affected. If it will go up, you may need to pass on this option and consider different avenues.
See If You Can Get a Personal Loan
If you have multiple payday loans or even just one, getting a personal loan from a bank, credit union, or other lenders may make sense. If the payday loan’s interest rate is high, then the personal loan, which normally comes with a better interest rate, can be used to pay off the other loan, ultimately saving you money.
Get a Credit Union Payday Alternative Loan (PAL)
A payday alternative loan (PAL) lets a member of a federal credit union to borrow money. The perks include better terms than those given by a payday lender, including lower interest rates and longer repayment terms. To qualify, you must have been a credit union member for at least a month, and you are allowed to ask for $200-$1,000. Maximum interest rates are undeniably high – 28%. They are far better, however, than the triple-digit interest rates offered by payday lenders. You are also held to strict repayment terms: six months at the most with no rollovers.
Look into Nonprofit Credit Counseling
The National Foundation for Credit Counseling is a great place to connect with specialists who can help you get out of debt. People with debt, first-time homebuyers, student loan borrowers, military service people and veterans, and small business owners are welcome to call and learn how they can get their interest rates and monthly payments lowered and receive other services.
Ask for a Loan from Friends and Family
One idea is to ask friends or family for a loan. It’s especially beneficial because doing so will not affect your credit score. However, it’s advised that you carefully work out the terms of the loan so that both of you understand them. That includes nailing down the interest rate and how quickly the loan must be repaid. Keeping the loan professional will help limit any disputes, another plus.
Ask for a Pay Advance
Your employer may be willing to give you an advance on your paycheck. You will work with them on the amount as well as the repayment terms. The only caution, of course, is to remember that if you borrow against your paycheck, you will have less money to pay the bills that are normally covered by it.
Work Overtime and Save Money to Repay Debt
Are you able to get overtime from your employer? If so, this is a wonderful way to avoid having to take out a payday loan or to pay one off faster. Every extra hour you work can be put towards repaying it and preventing it from spiraling out of control.
Do Side Jobs for Extra Cash
These days, side gigs are a very popular way to earn extra money. Take a few minutes to evaluate the time that you have as well as your skills. You may be working as an engineer, but off the clock, you’re an amazing guitarist. Could you give some lessons to the kids in your neighborhood? Perhaps your full-time job is as a medical transcriptionist, but on the weekends, you love to bake. Can you turn that into a small catering business? There are also plenty of part-time jobs you can get that will give you some extra income. These days, earning extra money from a side gig is all about creativity, so look at your skills and see how they might transfer. You may be surprised at what you come up with.
Avoid Taking on New Payday Loans
One of the most important things to avoid doing is taking out any new payday loans. It’s easy to understand why: the first payday loan you got quickly morphed into a disaster because of its astronomical interest rates. Taking out another one to pay it down or to pay for another need is definitely not recommended. You have many better options to try first, as you have learned.
Try a Payday Loan Consolidation/Debt Settlement Program
What helps many people is the assistance of a company that offers payday loan consolidation. You are given one big loan to cover the payday loan debt you have. The interest rate is typically better, and you can make one monthly payment instead of multiple ones. Customers enjoy payday loan relief because their loan debt has been consolidated, so this may be an effective option for you.
The Takeaway for Those Who Want to Leave Payday Loans behind Them
It can be financially overwhelming to be in debt to a payday lender. Fortunately, even if you have multiple payday loans, you’ve got some solid options for escaping them. Carefully review your choices and decide on the one that is best for you. Then make a plan, stick to it, and over time, you’ll see your debt go down. While it may take a while to achieve financial freedom, you’ll enjoy knowing that you are headed in that direction.