Payday loans are useful when you know you can repay them quickly, such as in between paychecks. However, you can fall into a payday loan debt if you are not careful. They can be a trap when the balance lingers and the interest becomes more expensive over time and can lead to long-term financial problems.
Here are ways to free yourself from a payday loan debt:
Approach Payday Loans with a Plan
You should never take out a payday loan if you have no way of knowing how you’re going to pay it back. The fees and interest can end up accounting for half your payments if you do not repay the loan on time.
It’s best to create a flexible budget that is comfortable for you with the intent of paying off the debt as soon as possible. Part of the plan should be to avoid taking out further loans to pay off your payday loan.
Related Article: Payday Loan Debt Cycle: 5 Tips to Avoid Them
Seek Professional Financial Help
Consider your options for borrowing before deciding on a payday loan. You can talk with lenders at the Community Financial Services Association of America (CFSA). The association offers extended payment plans (EPPs), which give borrowers four extra pay periods to repay a loan.
Sometimes the best way to get out of debt is to seek credit counseling, which can be customized to meet your financial needs. Your credit counselor can help you navigate through the choices to resolve your debt. You may consider debt consolidation as a strategy to lower your interest rate.
Related Article: How You Can Easily Avoid the Payday Loan Debt Cycle
The Last Resort: Bankruptcy
For some people who have fallen too far in debt, the best solution is bankruptcy, which wipes the slate clean and gives you a fresh financial start. Even though bankruptcy is often associated with financial failure, it can sometimes be the best solution for getting out of debt.
Be sure to consider the consequences and how it will have an adverse effect on your credit for seven years. It’s best to consult a financial advisor who can explain your responsibilities when you file bankruptcy.
Piling up debts from payday loans can be a miserable situation, as many times the interest rate increases after two weeks. If you have a regular income, you have plenty of options for getting out of the debt. Using a well-calculated payment plan is the best approach to payday loans. Starting an emergency fund is an excellent way to avoid future debts.