Freeing Yourself from Payday Loans
Payday loans are classified as short-term loans. The entire loan process is quick and easy and people who have bad credit usually can qualify for a payday loan. Customers get quick access to cash funds (normally within 24 hours). That's the good news. The bad news is that payday loan lenders charge outrageous interest rates (400% is fairly typical) and other loan fees. Plus, the loans are called short-term for a very good reason- the borrower generally has only two weeks to fully repay the loan.
It is widely known that payday loans are marketed towards lower income individuals who frequently have very poor money-management skills. The lure of quick and easy cash is hard for many people to resist- especially if they are behind on their bills or need to buy food for their families.
Studies have shown that many borrowers take out payday loan after payday loan until they are caught up in a serious cycle of debt which is extremely difficult to overcome. The reality is that it isn't easy to break this cycle of debt. But with determination and effort, it can be done. Here we offer some smart steps to take that can get you started on the right financial path.
- Take an honest look at your overall financial situation. This means making a list of every debt you owe. Calculate what your living expenses and bills are every month. Then determine your monthly net income (take-home pay). If you have more money going out than coming in, you need to be aware of it. If you don't already have one, make a budget. Living on a budget is one of the most important keys to successfully overcoming debt.
- Find ways to generate more income. Unbelievably, many people have no idea what they spend every month. They operate under the theory that you spend your money until it's gone and then hobble into payday eating Ramen noodles. It's one thing if you are a college student and choose to exist this way (it's still not recommended) but it's quite a different story if you are struggling to provide for your family. Take a second job or ask your employer if overtime is available. Slash your expenses as much as possible. Have a yard sale. Combine errands to reduce your gasoline consumption. Every little bit helps.
- Talk to your creditors. Explain the situation to them and see if a reduced payment plan is an option for a few months while you get back on your feet. Some auto loan lenders will allow you to skip a payment or two and will add it on to the end of your loan. Try every possible means to free up some cash to put towards your payday loan debt and other bills.
- Consider asking a friend or relative for help. This can be a touchy situation and you may need to balance needing extra money with the possible loss of a friendship. For this reason, you may want to think carefully before asking to borrow money. But if you have a close friend or relative who is willing to help, be certain that you can repay the loan according to the terms you both decide on.
- Contact your payday loan lender. If you are unable to repay your loan when it is due, let the lender know as soon as possible. Some payday loan companies offer extensions- you generally have to pay only the interest charges on the due date and then the principal amount plus additional interest are due in another two weeks. Terms vary so speak with your lender to see what options you have.