Americans borrow around $30 billion annually through payday and similar loans. Payday loans are a quick solution when you’re looking to get some cash on the fly. However, if you miss payments, you immediately enter a vicious cycle of debt and interest rates.
You’re more likely to add extra costs to pay off debt when caught in the payday loan tornado. 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 withdraw from your bank account without you noticing.
How can you avoid this? Check these 15 practical ways to pay back your payday loan in time to prevent getting to the courthouse.
Don’t panic!
When you can’t cover payments anymore, remaining in control of the situation is essential. Panic won’t pay your debt. It will add stress and anxiety to your current condition.
It would help to have a clear mind to juggle payments and current expenses. So, take a deep breath and find suitable solutions for your financial problems.
Know your rights
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 can’t discuss your financial situation with 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.
Contact the lender to see if you can get a repayment plan.
When you can’t cover payments, the first thing to do is talk to your lender. Explain your situation and ask for a repayment plan — with monthly amounts you can afford.
Payday lenders know that they won’t have their money back once you fail for bankruptcy. So, in most cases, you can get to an agreement.
Find alternative sources of money.
Whether you get a payday loan in Indianapolis or San Francisco, interest rates will be higher than using your credit card.
So, if you find an alternative source with lower interest, 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.
Borrow from your family or friends.
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 interest 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.
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 you, file complaints, and consolidate debt to have payments under control.
Build a realistic budget.
When you’re already in debt and have difficulties making regular payments, you must 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.
Prioritize your debts
It would help if you started with the most expensive debt- 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. Ensure you have enough money to make it to the end of the month before making your monthly payment.
Get a cheaper phone contract.
You’re less likely to have missed payments when you cut down some expenses. 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.
thousands of dollars. Would that be enough to pay off your payday loan?
By cooking more often, you eat healthier while covering your debt and repairing your credit.
you’re doing your job correctly, you can ask for a raise. Discuss with your superior the conditions where you could get the extra money, and see if you can agree.extra cash with freelance jobs.
If your company isn’t doing 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. You can earn less than $500 a month to thousands of dollars depending on your skills and knowledge.
Sell unnecessary stuff
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 are plenty of places where you can find buyers for your old clothes, collectibles, electronics, or music equipment.
Work on building a good credit score.
As you progress with payments, make sure you improve your credit score to have an alternative if you find yourself in a similar situation.
When possible, try to pay more than the minimum amount each month to reach this goal. In some cases, accepting a credit line increase is also an excellent method to upgrade your score.
What’s Next?
Payday loans are easy to get but hard to repay if you’re not a disciplined borrower. 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 ensure you have all the information about future payments when signing a new contract.
