Payday loan debt can be a short term
financial help before your next payday. Your lenders however, charge a
horrendous interest rate on the fast cash loan. If you mismanage the loan it
can lead you to a deeper debt problem that you cannot get out.
If you borrow six dollars and pay seven in two weeks that works out to
an annual interest rate of over 370%. This means that if you rotate a
fast cash loan of $100 for an entire year, you'll end up paying $470
total. By contrast, even the most hard-cased credit cards are in the
range of 24-25% per year -- a savings of $345.
Did You Use Payday Loans as Short Term Loans?
Payday loan can offer you from $100 to $1000 quickly with requirements
that are easy to meet. You'll be able to find out within a few
minutes whether or not you are approved and you can get the cash you
need in your checking account the same day. So, even if you don't have
the best credit out there, you can still get the money that you need in
an emergency.
But did you pay the loan on the next payday? If not, then you don't use
it as a loan for urgent, short-term financial needs. Even though your
lenders may allow you to extend the loan for two one-month extensions
this will result in a substantial amount of penalty charges. If you keep
extending the due date from payday to payday, the penalty and interest
charges will sum up at an uncontrollable amount.
Getting Rid of Payday Loan Debt
A lot of consumers using payday loans don't have credit cards, or had
very poor credit, or abused and misused their credit. If you are one of
them, there are some ways out of the problem:
Pay off the smallest debts to free up the capital to tackle the larger
ones. If you're rolling multiple payday loans, pay them off first. Talk
to friends and family; ask them if they could extend you a small amount
of money to pay off your cash advance loan.
Bring in extra income. Pick up a part time job or find a way to do some
freelance work.
Get a debt consolidation loan. If you have a checking account applies
for a consolidation loan for paying off your payday loans. Even if the
consolidation loan is at 22%, it's still better than a fast cash loan.
Create a budget. Go through three months worth of receipts to find out
what you're really spending and look for things to trim away.
All of these are standard advice from credit counseling services, which
your bank probably directs you to one. If you are using their services
consider working with reputable credit counselors that are nonprofit.
And once you've paid down your payday loan debt, change your spending
habits. Try to spend no more than 90% of what you earn, and put the rest
in an interest bearing account. This way compound interest works for you
rather than against you.
