How to Get Out of a Payday Loan Nightmare?

Thomas Morgan

17.11.2024

Each one of us has been in the situation of needing some extra cash quickly. Of course, financial advisors will always tell us that we need to have an account for rainy days. Indeed, having at least several hundred bucks on the side is ideal but often challenging. That is even more true now when the pandemic leads to paycheck reductions and layoffs.

Since most of us prefer to borrow money elsewhere rather than asking friends or family members, payday loans seem like an amazing opportunity. They are small, short-term loans advertised as ideal for people with bad credit reports, those who have trouble making ends meet, etc. Indeed, the cash that you usually get with these types of loans is very small. On average, it ranges somewhere between $250 and $500. You think that this is not difficult to pay back, right?!

We could say you are right. But then the question is how these small loans may turn into a huge nightmare. In the post in front of you, we will try to answer this question and help you figure out how to get rid of payday loans.

Why It Is So Easy to Get Into a Payday Loan Trap?

These loans are attractive for their convenience. The application and approval process is pretty straightforward and fast. In most cases, we are talking about payday loans online. Therefore, when you go on the lender’s website, you will see an online form that you need to fill out and submit. You will also be asked for additional documents such as your ID, proof of residence, income, etc. Most of those lenders don’t check your credit score, which is why they are attractive for people with no or bad credit. Plus, you are getting a small amount of money that you think you will pay back easily.

But, the problem is that the deadline for paying back payday loans is about two weeks. Now imagine a person who is living from paycheck to paycheck and doesn’t have any savings. This person has unexpected expenses and decides to borrow $250 from a payday lender like Loan Solution, thinking they can easily repay it. However, when someone lives from month to month, it is hard to imagine that they have money to pay back the loan in time. This person then decides to take another loan from another lender, and this is how they fall straight into the payday loan trap. Now two loans come with high-interest rates and fees if you don’ pay them back on time. And even if you do manage to eliminate payday loan number one, you will likely need to take another one to make up for the financial difficulties caused by these loans. So, it is a vicious circle.

Apart from that, in case you don’t pay in time, lenders will become intense about collecting what is owed to them. So if your check doesn’t clear or you don’t have resources, they will collect money from the bank account when you receive your paycheck. As if that is not enough, they might start calling you and sending emails. And as they don’t value your privacy, they will call your friends and family. If you don’t answer their calls, they might appear at your doorstep. Finally, they might resort to debt collection agencies or court in an attempt to get back the money you owe them. If you are looking for help to get out of payday loan debt, you are in the perfect place. Let’s dive in.

How to Get Out of a Payday Loan Debt?

Okay, so it is important to know that getting out of payday loans isn’t simple. The best advice you can give to yourself is to never take them in the first place, regardless of how attractive they might seem to you. Or stop taking them. But if you are one of the millions of people worldwide who are already in payday loan trouble, the first thing you need to know is that you are not alone. Here are a few tips on getting rid of payday loans.

Look for Payday Loan Consolidation

Debt consolidation is a process of taking a new loan with lower interest rates to cover the existing loans. It is a good option for people who have plenty of high-interest loans. However, it is important to note that you will still have to pay the full amount of the loan. Consolidation is not the same as the settlement, where you agree with the creditor to write off some of your debts. Additionally, if you have a poor credit score, it will not be simple to get a loan with low interest. This is the case when we are talking about an actual debt consolidation loan. However, there is an alternative called debt relief or debt consolidation program, and it is a bit different. In this situation, a third party takes and pays off your loan while they make an arrangement with you to pay flat monthly payments to them.

Refinance with a Personal Loan

Most people apply for payday loans because the lenders don’t check the credit report, so they can get approved even with a poor credit score. But if this is not your case and your credit score is above 600, you can refinance a payday loan with a personal loan. Personal loans are unsecured loans that you pay off each month during the period between 1 and 7 years. Interest rates vary depending on the lender, but the average is somewhere around 36%.

Get Help From Non-Profit Credit Organizations

Generally, nothing about understanding finance is simple. But payday loans are probably among the hardest things to comprehend, which is why so many people fall into the trap. Ideally, you should hire a credit counselor to help you create a payday loan repayment plan. However, the problem is that when you are in a payday nightmare, you probably can’t afford a financial expert.

Luckily many nonprofits offer debt counseling so you can reach out to them. Some of them are local governments, credit unions, and universities. Now they will not have an instant solution for you. But they will discuss different options to get relief from payday loans. Make sure though, that you research the organization that is offering to counsel about ways of stopping payday loan. They are many scammers out there who can pull you into an even bigger mess.

Borrow from Friends or Family

One way to get help to pay off payday loans is to ask friends and family. Now, this can be embarrassing for sure. But borrowing money from people close to you, without any interest, is definitely a good way to get out of a bad financial situation.

Get a Second Job

If you are too proud to borrow from friends or family and want to solve the problem yourself, consider getting a second job. It doesn’t have to be something challenging. Today there is everything but a shortage in the gig economy. For example, if you love dogs, you can offer dog walking services. Also, you can become an Uber driver or start delivering food. In any case, you have plenty of options, and if you have extra time, go for some of them.

Think of Payday Alternative Loans

If nothing else works, look for alternative payday loans. Some credit unions offer these types of loans with way lower interest rates than payday loans. They are short-term loans. Lenders can decide on some individual rules. But the National Credit Union Administration has a set of general rules that every lender needs to respect.

• Loan terms are between one and six months
• The maximum interest rate is 28%
• The maximum loan amount is $1000
• The maximum application fee is $20

What to Do After You Get Rid of Payday Loans

Once you get out of a payday loan nightmare, you need to take steps to prevent the possibility of ending up in the same situation again. Start creating a rainy days fund by putting at least $1000 on the savings account. Generally, you will see that it is easier than you think. This, of course, will not solve all of your financial problems. However, it will help you not to take payday loans to cover unexpected expenses. Then try to improve your credit score so you can take a more affordable loan in case of need. However, if you find yourself in the situation of needing a loan in the meantime, contact credit unions to see if you can get a more affordable alternative payday loan. But keep in mind that the best thing is to avoid any payday loans if possible.

Bottom Line

Getting out of the payday loan nightmare is not easy. However, it is the first step towards financial security and independence. Once you don’t have payday loans hanging over your head like the sword of Damocles, you will feel better. Apart from that, you will become free to plan the future you want with some cash in your bank account and debt-free.