The key is to shop around and find a loan at the most affordable rate and with the most favorable terms possible.
If you are able to get a personal loan, you can significantly reduce the interest rate and borrowing costs you pay compared to payday loans. More of your money will go towards paying off your main balance, so you can actually reduce your debts.
And personal loans come with fixed repayment schedules that usually give you several years to pay off your loan. This extended repayment period can make your monthly payments more affordable. This way, you won’t have to borrow more money when your paycheck doesn’t stretch far enough to pay for everything you need plus cover expenses.
You can also use other types of loans, such as home equity loans, to consolidate your debt, but these can take longer to qualify, come with higher closing costs, and put your house at risk as collateral.
Commit to no longer borrowing
Once you’ve borrowed with a payday loan, the high fees and short repayment period associated with your loan can sometimes make it difficult to stop borrowing. In fact, many people end up taking out one payday loan after another or even taking out multiple payday loans at the same time. This can quickly lead to financial disaster when a large portion of your salary is promised to lenders before you even receive it.
Unfortunately, the bottom line is that you can’t borrow to get out of debt, especially with high-interest loans like payday loans. We must break the cycle by no longer taking credit. However, this can be very difficult if your paycheck doesn’t stretch far enough due to payments you’re already obligated to make.
The best way to make sure you don’t borrow anymore is to make a detailed budget that you live on. Figure out what your income is each month and add up all your essential and discretionary expenses. You will need to ensure that your outgoings and outgoings do not exceed your income. If they do, you will have to keep borrowing forever and never be able to get out of payday loan debt.
If your income doesn’t cover your expenses, start looking for places to reduce your expenses. That might mean cutting coupons to reduce your food budget or finding a roommate to make rent more affordable. If you have a drastic shortage in the amount of cash available to cover expenses, you may really need to cut expenses to the bone – but it is necessary to do so at least in the short term so that you can get out of your debts.
If you really want to pay off your debt as soon as possible, making extra payments is essential. When you make additional payments, it will cost you less in total to pay off your debt, as well as reduce the time it takes to become debt free.
Paying extra on your loan will reduce the balance faster because all the extra money will go towards the principal. And the more you reduce your balance, the less interest you will pay since interest is charged on a lower amount.
You can make extra payments by living on a prudent budget that keeps expenses down. You can also seek additional cash to increase your payout. To find extra money to pay off your payday loans, consider:
- Doing overtime
- Work a side gig
- Selling things you don’t need
Sometimes you might not be able to agree on a repayment plan that makes payday loans affordable for you, and you might not be able to get a new loan that makes paying off payday loans affordable.
If you find yourself unable to make payments while covering your essential monthly expenses, you may have no choice but to try to pay off your debt or file for bankruptcy.
Debt settlement involves making an agreement with creditors to repay less than the total owed and have the rest of your debt forgiven. Debt settlement lawyers or debt settlement companies can negotiate this type of agreement with payday lenders, but you will have to pay a fee.
You can also try to negotiate this type of agreement yourself by informing the payday lenders that you are unable to pay as promised. If you can offer a lump sum payment of a portion of your debt in exchange for canceling your debt balance, this approach often works best.
Just be aware that lenders generally won’t accept a settlement unless you’ve missed payments — and debt settlement hurts your credit score. You will also want to get your agreement in writing before you pay anything.
If debt settlement isn’t working and payments are unaffordable, bankruptcy may be your only answer. Bankruptcy will allow you to discharge eligible debts, including payday loan debts.
The process by which debts are discharged varies depending on whether you are filing Chapter 7 or Chapter 13. Chapter 7 requires you to assign certain assets to the bankruptcy estate so that creditors can be partially paid. Chapter 13 requires you to make payments on a three to five year payment plan before the remaining debt balance is forgiven.
Bankruptcy hurts your credit score, but it can get you out of a deep hole if you have a lot of payday loans and other debts you can’t afford to pay. Once your debt has been discharged and is no longer collectible, you can begin to rebuild your credit. This can be done over time by living within your means and getting a secure credit card that you pay on time to develop a positive payment history.
How can you repay your payday loan?
Ultimately, there is no one right approach to getting payday loan debt paid off.
Entering into a repayment plan makes sense if your state requires lenders to authorize them or if your lenders are willing to work with you. Taking out a new loan at a lower rate to pay off payday loan debt can work if you are able to qualify or if you have a loved one who will allow you to borrow. It is possible to pay extra on your loans if you can work more or sell additional items to get more money.
But if none of these options work for you, debt settlement or bankruptcy may be the only way to finally free yourself from your payday loan debt.
Carefully consider each possible option, weigh the pros and cons, determine which solutions are viable, and then act. Start working on your approach today because you absolutely want to get your payday loans paid off ASAP before they cost you even more money.