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!
|Lender||APR Range||Loan Amount|
|1 Includes AutoPay discount. Important Disclosures for SoFi.
2 Includes AutoPay discount. Important Disclosures for Payoff.
3 Important Disclosures for FreedomPlus.
4 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
5 Important Disclosures for LendingPoint.
6 Important Disclosures for LendingClub.
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.
8 Important Disclosures for Avant.
* 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
** 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 - $50,000||Visit Upstart|
|6.26% – 14.87%1||$5,000 - $100,000||Visit SoFi|
|6.99% – 35.97%*||$1,000 - $50,000||Visit Upgrade|
|5.99% – 24.99%2||$5,000 - $35,000||Visit Payoff|
|4.99% – 29.99%3||$10,000 - $35,000||Visit FreedomPlus|
|5.99% – 18.99%4||$5,000 - $50,000||Visit Citizens|
|15.49% – 34.49%5||$2,000 - $25,000||Visit LendingPoint|
|6.16% – 35.89%6||$1,000 - $40,000||Visit LendingClub|
|6.99% – 18.24%7||$5,000 - $75,000||Visit Earnest|
|9.95% – 35.99%8||$2,000 - $35,000||Visit Avant|