Payday loans are a quick and convenient fix if you need cash in a hurry. Although they carry a higher average interest rate, the intended goal is to help you get the money you need quickly and easily. The drawback is the payday loan debt cycle that many people fall into when trying to pay off their payday loans. Consider these 5 tips to avoid the payday loan debt cycle.
- Look at the Bigger Picture
If you start to find yourself in over your head when it comes to the amount you owe, look at the bigger picture. Look closely at the percentage of credit card debt and payday loan debt that you have. Find out where the majority of your money is going when you pay your bills each month.
- Focus on Debts with the Highest Interest Rates
Credit cards and payday loans will often have the highest interest rates. Focus on paying these types of debts down as quickly as possible. Create a budget and determine just how much money you can afford to devote to these bills each month.
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- Extended Payment Plans
Talk to the lenders who hold your payday loans and see if they will offer you an extended payment plan. Having longer to pay may provide you with an opportunity to avoid the need to borrow more from them. Negotiating an extended payment plan on your payday loan debt will put you back in control of your finances and minimize late fees.
- Turn to Credit Counseling
If you’re troubled with debts like payday loans, get the related assistance from credit counseling programs to find a way out. Select from among the prestigious, non-profit organizations that can help you walk through your financial state, offer you advice, and create a plan to tackle your debts.
- Use a Personal Loan
If you have several credit cards or payday loans, it might be a good idea to get a personal loan and consolidate all of your debt into one monthly payment. Consolidating your small debts reduces your risk of forgetting to pay one or not being able to pay one at all. A personal loan can pay to off several small accounts leaving you with one payment and a lower interest rate.
Break your cycle of debt. Avoid falling into some of the most common traps and you will be able to use payday loans effectively without getting caught up in the cycle.