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.

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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.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

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.

RATES (APR)loan amount
7.73% – 29.99% $1,000 to $50,000
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  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 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 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% 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.

    To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.See Consumer Licenses.
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  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.
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Opploans currently operates in these states:

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. This information is current as of October 10, 2017 and is subject to change. Opportunity Financial, LLC lends or arranges loans in the following states: Alabama, California, Delaware, Florida, Idaho, Illinois, Kansas, Maryland, Missouri, Nevada, New Mexico, Ohio, South Carolina, Tennessee, Texas, Utah, Virginia, and Wisconsin. We do not lend or arrange loans in all states. Opportunity Financial offers line of credit products in: Kansas, Tennessee and Virginia. Please note: This is an expensive form of credit. This service is not intended to provide a solution for longer-term credit or other financial needs. Loans made or arranged by Opportunity Financial are designed to help you meet your short-term borrowing needs. Loan amounts may vary and are dependent upon qualification criteria and state law. Refer to Loan Cost & Terms at www.opploans.com for additional details. Complete disclosures of APR, fees and payment terms are provided within the transaction documents, such as the Loan Agreement. First-time Opportunity Financial customers typically qualify for an installment loan of $1,000 to $5,000 with an APR from 59% to 199%. For example, a $1,000 loan made or arranged by Opportunity Financial with 12 bi-weekly payments of $130 has a 199% APR. After the 12th successful payment, the loan would be paid in full.
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  4. Lower APRs and longer terms when compared to a typical payday lending product. According to the Consumer Federation of America, a non-profit consumer advocacy group, payday loans range in size from $100 to $1,000, depending on state legal maximums and carry an average APR of 400% and an average loan term of two weeks. The maximum APR for a loan offered by OppLoans is 199% and loan sizes range from $1,000-$5,000 with a typical term of six months dependent on the state law.
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* 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.

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