Americans spend around $30 billion a year to borrow money through payday and similar loans. In fact, payday loans are a quick solution when you’re looking to get some money on the fly. However, if you miss payments, you’re immediately entering into a vicious cycle of debt and interest rates.
When you get caught in the payday loan tornado, you’re more likely to add up extra costs to pay off debt. In fact, the more you wait to solve this issue, the more money you have to pay to get out.
Depending on the amount you’ve borrowed and the legislation in your state, you risk receiving threatening letters from lawyers and having your lender withdrawing from your bank account without you having been noticed.
How can you avoid this? Check these 15 practical ways to pay back your payday loan in time to prevent getting to the courthouse.
When you can’t cover payments anymore, it’s essential to remain in control of the situation. Panic won’t pay your debt. It will add up stress and anxiety to your current condition.
It would help if you had a clear mind to jiggle between payments and current expenses. So, take a deep breath and start looking for suitable solutions for your financial problems.
Some lenders go too far when it comes to getting back their money. You must know that no lender can assault you with emails, phone calls, or text messages. Plus, they aren’t allowed to discuss your financial situation with your co-workers, superiors, friends, or relatives.
According to the Consumer Financial Protection Bureau, you can’t go to jail for defaulting on a payday loan.
The first thing to do when you can’t cover payments is talking to your lender. Explain your situation and ask for a repayment plan — with monthly amounts that you can afford.
Payday lenders know that once you fail for bankruptcy, they won’t have their money back. So, in most cases, you can get to an agreement.
Whether you get a payday loan in Indianapolis or San Francisco, interest rates are going to be higher than if using your credit card.
So, if you find an alternative source with lower interests, consider paying off the payday loan. You’ll still be in debt, but you’re more likely to spend less in the long run for fees and interest.
If your credit score is too low and no other financial institute lends you money, do all you can to avoid rolling your loan over. It will only bring you more debt due to additional interests and fees.
Lending from a relative or a friend can help you pay less to pay off debt, as you don’t have to deal with commissions.
Look for a credit counseling service.
Credit counseling services can help you organize your finances and put you back on track.
Non-profit, accredited advisers can teach you how to deal with debt collectors and keep your, file complaints, and consolidate debt to have payments under control.
When you’re already in debt and have difficulties making regular payments, you need to make a budget and stick to it. This way, you can track your expenses and save more.
When you know how much you earn and how much of it you can afford to spend, you’re more likely to have enough money to pay off payday loans in time.
It would help if you started with the most expensive debt — which is the payday loan. This way, you save money that you can use to repair your credit so that you don’t have to take another short-term loan in the future.
However, paying off your loan should come before food, rent, and other essential expenses. Make sure you have enough money to make it to the end of the month before making your monthly payment.
When you cut down some expenses, you’re less likely to have missed payments. Among current living costs, a more affordable phone contract can help you save significant money yearly.
Compare plans and choose a provider that can help you reduce monthly expenses. You can do the same with your cable package, as well.
Look for alternatives to going to the cinema, share memberships, or attend free events. Any of these can help you cut entertainment expenses.
You can have an active social life even when you’re on a budget. Volunteer or buy tickets on Craigslist, to get to your favorite events spending less.
Eating out regularly can increase your expenses by thousands of dollars. Would that be enough to pay off your payday loan?
By cooking more often, you get to eat healthier while covering your debt and repairing your credit.
An effective way to pay back your payday loan is by increasing your income. The first place to start is your current job.
If the company performs and you’re doing your job the right way, you can consider asking for a raise. Discuss with your superior about the conditions in which you could get the extra money, and see if you can agree.
If your company isn’t doing pretty well, you should consider getting the extra cash from other sources. Freelancing can become a consistent source of income that can help you pay off your loans.
More than 57 million Americans take freelance projects to make a living. Depending on your skills and knowledge, you can make from less than $500 a month to thousands of dollars.
Get rid of old items for a good cause — your financial independence. You’ll remove clutter and get some quick money to cover payments. You can organize a yard sale or, even better, list your stuff online.
From eBay to Etsy and Facebook, there’s plenty of places where you can find buyers for your old clothes, collectibles, electronics, or music equipment.
As you move on with payments, make sure you improve your credit score to have an alternative if you find yourself in a similar situation in the future.
Try to pay more than the minimum amount each month, when possible, to reach this goal. In some cases, accepting a credit line increase is also an excellent method to upgrade your score.
Payday loans are easy to get but hard to pay back if you’re not a disciplined borrower. Make sure you pay your debts on time to avoid being sued for less than $500.
If, for any reason, you miss payments, discuss options with your lender. Or find a better deal. Do the math and make sure you have all the information about future payments when signing a new contract.