Financial specialists have stated that payday loans are the primary reason why people get into a debt cycle. Payday loans are considered as debts, Payday loans are short-term in nature and Usually, they will be paid 15 to 45 days for the loan to be repaid.
It has been analyzed that payday lenders who will go beyond the normal time frame of the 45-day limit will already belong to the long-term debts. These funds are considered very high when it comes to interest rates.
They can take around 300 to 500 percent when you compute them annually. For this reason, they can catch the person in a debt cycle that will go on for years and cost you a fortune.
For many consumers, payday lenders will be the only source they can have when they need immediate cash. When this happens, you need to make sure you pay back the loan when it becomes due.
It’s important to remember that these debt instruments are cash advances from your payroll check that has not yet arrived and should only be used for your necessities. Hence, it is important to remember that you need to pay these debts on time and in full when your paycheck comes in.
Time To Create a Budget
When you get into a debt cycle, you must break it as soon as possible. To continue the cycle of borrowing will get you nowhere, you will need to act quickly and swiftly. The first step to break the debt cycle is to create a budget. This would mean starting the process right now, do not procrastinate. Creating a budget to get out of the payday loan debt cycle means living within your means. Depending on how much you owe, you may need to cut all entertainment expenses and only pay for what you need to survive; I’m talking about food water, and shelter only. With the money you save, you are more likely to pay off your debts over time and you will be proud of yourself that you did.
Negotiating With Your Creditors
Since you must take the time to fix whatever cash flow problem you have, there is no shame in calling your payday lender and letting them know that you are having trouble coming up with the money to repay your loan. You may find that your lender is more than willing to help you. Here are some questions you should ask your lender and remember there is nothing wrong with asking a question:
- Ask if they would be willing to cut the interest and/or create an affordable payment plan.
- Ask for an extension on your loan. If your lender is a member of the CFSA (Community Financial Services Association of America) your lender is required to approve an extension if you are not able to pay your loan back on time. Otherwise, if they are not a member and does not approve your extension, the last thing you should do is take out another loan. You’re only digging yourself a deeper hole and some other alternatives just might work.
- Do you have anything of value you could sell? Marketplaces such as eBay, Craigslist, garage sales, and even pawn shops are great ways to sell items and repay your debts.
- Ask a friend or a family member. Entice them with paying them back with a reasonable amount of interest and repay the loan quickly.
- Seek additional employment to earn the money you need to repay your loans.
- Contact a debt settlement company to help negotiate with your payday lenders. It’s amazing what a trained professional can do.
- As a last resort, seek out an attorney and discuss with him if your situation is dire enough to file bankruptcy.