Payday loans are an appealing choice for people going through a financial crisis since they are short-term, high-interest loans that can be arranged quickly and conveniently. However, because the borrower frequently pays considerably more in interest and fees than they borrowed, these loans can result in a debt cycle that is challenging to escape.
In this article, we’ll go over what payday loans are and how to get out of debt if you’re having trouble paying them back.
What are payday loans?
Payday loans are small, unsecured loans that are typically due on the borrower’s next payday. The loans are usually for $500 or less and are intended to solve unexpected expenses or emergencies quickly. To obtain a payday loan, the borrower must provide proof of income and a checking account.
The downside of payday loans is that they come with extremely high-interest rates and fees. The interest rate on a payday loan can be as high as 400% or more, and the fees can add up quickly. If the borrower is unable to pay back the loan on time, the lender may roll over the loan, adding additional fees and interest.
How to get rid of payday loans?
If you find yourself struggling with payday loan debt, there are several options available to obtain financial relief. Here are examples of some of them:
Extended payment plans
Many payday lenders offer extended payment plans (EPPs) that allow borrowers to repay their loans over a longer period of time. This option is only available if the borrower contacts the lender before the due date and is often subject to additional fees.
Debt consolidation plans
A way to combine all of your bills into one affordable monthly payment is through debt consolidation. This can lower your interest costs and make it simpler to manage your debt.
Payday loan consolidation
If you have multiple payday loans and are struggling to keep up with the payments, payday loan consolidation may be an option. This involves combining all of your payday loans into one loan with a lower interest rate and more manageable payments.
Bankruptcy
If all other options have been exhausted and you are still struggling with payday loan debt, bankruptcy may be an option. Filing for bankruptcy can help you eliminate payday loan debt and other unsecured debts. However, it should be considered as a last option, as it can have long-lasting consequences on your credit.
Further help and information about payday loans
If you are considering taking out a payday loan, it is important to do your research and fully understand the terms and fees involved.
Resources and information on payday loans and other consumer financial services are available from the Consumer Financial Protection Bureau. Moreover, nonprofit credit counseling organizations are another resource that can assist you in managing your debt and provide advice on debt reduction choices.
