How to Break Out of the Payday Loan Debt Cycle in 8 Steps or Less

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If you’re facing a payday loan that you can’t keep up with or that seems to keep growing, you’re not alone.

Payday loans can cost you more than you ever intended to borrow in the first place. That’s because payday lenders intentionally structure payday loans to make them expensive and difficult to repay.

In fact, a Pew study found that the typical payday borrower would pay $55 every two weeks just to borrow $375. That’s equal to a 381% APR!

Additionally, a borrower typically pays $520 in fees over the course of five months before they manage to pay off the entire payday loan. This Pew video explains why borrowers can have such a hard time getting rid of their payday loans.

“The payday loan debt trap is a common experience for many payday loan borrowers, but there are ways that borrowers manage to climb out,” says Liana Molina, director of community engagement with California Reinvestment Coalition.

Here are some steps you can take to start tackling your payday debt, pay it off, and get out of the payday loan cycle.

How to get out of payday loan debt

1. Look at all your debts together

When you’re trying to figure out payday loans, you can get hyper-focused on the amount you need to pay. For instance, how to come up with the $375 you owe by your next due date.

But if you look at your whole financial picture, you might find other opportunities to save or repay this debt.

“Your starting point should always be to build a complete picture of your debt, including all loans, credit cards, etc.,” says Barry Stewart, an insolvency expert with 180 Advisory Solutions. “Make sure you record both amounts and interest rates on each.”

2. Prioritize high-interest debts

Once you know what you owe, to whom, and how much each debt is costing you, you can prioritize your payments.

“Prioritize the debt with the highest interest rate,” Stewart recommends. “Paying off those first and then moving onto debt with lower interest rates cuts the total you’ll end up paying.”

With fees that are equal to three-digit APRs, payday loans are most likely to be your most expensive debts. Even worse, you only have until your next paycheck to come up with the full balance – or you’ll face fees to renew the loan.

To wipe out a payday loan, you need to either restructure the debt or figure out how to come up with the full amount ASAP.

3. Ask for an extended payment plan

The way payday lenders structure payday loans makes them expensive and difficult to repay. Therefore, try and find a way to restructure your payday debt.

“You can ask to negotiate a payment plan with your lender,” Molina suggests.

You can also ask your payday lender if you can get on an extended payment plan (EPP), which will break your loan up into smaller installment payments. You’ll have more time to repay the loan, and you won’t be hit with additional fees or interest in the meantime.

Payday lenders that belong to the Community Financial Services Association of America (CFSAA) tend to be more flexible and will usually give you an EPP. Just remember that you’ll need to ask before closing on the last business day before your loan is due.

You’ll also most likely sign a new loan agreement with the terms of your extended payment plan. Make sure you read it carefully and understand the full terms before you agree.

4. Refinance with a personal loan

If your payday lender is not part of the CFSAA or is unwilling to give you an EPP, consider going elsewhere for money to cover this debt.

For instance, you can try payday loan debt consolidation with a personal loan. Keep in mind that you’ll need at least fair credit to qualify for most personal loans. Some online lending platforms, such as Avant, accept loan applicants with credit scores as low as 580.

If you have a credit card, you could also try getting a cash advance on the card to repay your payday loan. Just be careful since credit card debt is also high-interest debt. Plus, having high credit card balances can damage your credit.

Check Out personal loans through Avant Here

5. Get a credit union payday alternative loan

Credit unions often offer small, cheap loans called payday alternative loans (PALs). You will likely have to be a member for at least a month to get a payday alternative loan.

But these loans can be an effective way to pay off an existing payday loan and replace it with an affordable payment plan. Credit unions that offer PALs typically lend anywhere from $200 to $1,000, with terms of one to six months.

6. Look into payday loan debt assistance

If you’re struggling with payday loans and other debts, payday loan debt assistance and credit counseling programs can help you find a way out. Look for reputable, non-profit organizations that offer debt counseling and help.

“Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs,” says the Federal Trade Commission.

Credit counseling will walk through your financial situation, provide you with advice, and set you up with a plan to tackle your debts. Some nonprofits also offer cheap, affordable loans to refinance or consolidate debts.

However, be wary of scams.

“With debt consolidation, there are scam artists who will actually make your situation worse,” Molina says. “If they’re making promises that sound too good to be true, or if they ask you to pay a lot of money for their services, then steer clear.”

7. Borrow from your support network

Another option to get the cash to pay off a payday loan is to borrow from your social group. While borrowing money from friends and family has its own risks, it can be an effective way to wipe out a payday loan and replace it with manageable debt.

If you attend church or are part of a religious community, consider asking for their help as well. Many churches provide charitable financial assistance and can help you pay off a payday loan.

8. Turn to your job for debt help

Alternatively, you can ask your employer for an advance on your paycheck. Many employers will allow you to get prepaid for work you’ve not done. But you have to be careful that you can afford to take this money and put it toward your payday loans without hurting your ability to cover other costs.

Ask your employer if you can pick up some extra hours to earn some more cash. Managers are often understanding of their workers’ financial demands and will try to help you out. If you can’t pick up extra hours with your main job, consider picking up some side gigs to get quick cash.

Break the cycle for good

Figuring out how to get out of payday loan debt is the first step to getting your finances on track. And it can be one of the hardest, but it’s worth it. Without a payday loan hanging over your head, you’ll be free to fix your money management and build lasting financial security.

And the next time you need a quick loan, remember to just skip the payday loans altogether.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal LoansFixed rates from 7.08% APR to 15.37% APR (with AutoPay). Variable rates from 5.81% APR to 14.11% APR (with AutoPay). SoFi rate ranges are current as of August 10, 2018 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.81% APR assumes current 1-month LIBOR rate of 2.07% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. Terms and Conditions ApplySOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS #1121636.
    (www.nmlsconsumeraccess.org)

2 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.16% to 35.89%. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at time of application. The origination fee ranges from 1% to 6% and the average origination fee is 5.49% as of Q1 2017. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months or longer.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000Visit Upstart
5.81% – 15.37%1$5,000 - $100,000Visit SoFi
6.87% – 35.97%*$1,000 - $50,000Visit Upgrade
8.00% – 25.00%2$5,000 - $35,000Visit Payoff
4.99% – 29.99%3$10,000 - $35,000Visit FreedomPlus
5.99% – 18.99%4$5,000 - $50,000Visit Citizens
15.49% – 34.49%5$2,000 - $25,000Visit LendingPoint
6.16% – 35.89%6$1,000 - $40,000Visit LendingClub
5.49% – 18.24%7$5,000 - $75,000Visit Earnest
9.95% – 35.99%8$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.