You took a small payday loan for an emergency but are struggling to repay it? This is not rare for such loans. In fact, most borrowers fail to repay their payday loans in time.
Failing to repay the loan can add late fees, affect credit score, and even get summoned to court. Therefore, it’s important to get out of payday loans. If you don’t know how, we can help. Make a budget, limit your costs, talk to the lender, and ask for help.
Easy Steps to Get Out of Payday Loan Debt
If you are already trapped in a debt cycle, check the below discussion. This will help you get rid of the debt and maintain a budget.
1. Create a Personal Budget
The first thing you need to do is create a budget. Make sure you are being realistic about it. You should prepare a list of all weekly and monthly expenses. This will help you decide how much you can repay.
Also, try to reduce your costs. Additionally, you must also do the calculation before taking the loan. Only take an amount that is needed and avoid taking extra. Creating a budget will help you get out of the loan sooner and faster.
2. Request an Extension
Failing to repay loans often leads to rollovers. So, check your agreement to know about their policies. If there is any clause for rollovers, you need to talk to the lender. Call and discuss a possible extension.
You can share your problem and explain why you cannot repay. Ask for an extension, which will save you from paying additional charges. Inform the creditor about how much you can pay and when you are planning to repay the rest of the amount.
3. Negotiate the Debt with a Payday Lender
Payday loans come with high interests, often ranging between 400% and 800% a year. This means you would have paid 4 to 8 times the debt amount if the loan lasted for a year. Such high interest makes it challenging to repay the loan.
You can call your payday loan direct lender and discuss reduced fees. They may agree to reduce fees or extend your due date. Always get the new terms in writing. This helps you stay on track. Don’t ignore their calls or letters, as talking to them shows you are willing to fix the problem.
4. Seek Professional Advice
Talking to a credit counselor can help you get out of the loan. They know how to deal with payday loan debt. They can also help you with payday loans and legal defense.
Many counselors offer free help, look at your full money situation, and make a plan. Some can talk to lenders for you and help lower the payments. Don’t worry about being judged by the counselor, they don’t do these. They can also advise you on long-term tips. However, you should ensure that the advisor is certified.
5. Ask for Help
In the end, you need to manage money to get out of the loan. So, reach out to family or friends. Let them know you are struggling and ask if they can help with a small loan. Thankfully, the loan is usually a small amount, unless you took a high amount of payday loan.
You must be honest about your plan and debt. Local charities or churches can also help in such conditions. Some offer emergency help so that you can quickly repay the lender and escape the debt cycle. Asking for financial help might seem hard, but it’s a smart step forward to getting out of debt.
What Happens If You Don’t Pay Off A Payday Loan?
Try to avoid getting into loan traps and take immediate action. Otherwise, there can be more issues and eventually you’ll have to deal with bigger financial issues. Here are the things that can happen:
1. Addition of Late Fees
If you miss a payment, the lender may charge late fees. These fees are often listed in your loan agreement. They can add up quickly. Some lenders charge a flat fee, while others charge a daily fee for each day the payment is late. These extra costs make it harder to pay off the loan. This increases your total debt.
2. There Will Be Frequent Collection Calls
You may get frequent calls and letters from the lenders. Sometimes, they may leave it to collectors, who will try to put more pressure on you. You might get calls at work or home or during important meetings. This can be stressful and harassing. These calls will not stop until you make a payment or make a plan. It’s better to talk to them instead of avoiding them.
3. You May Need to Attend the Court
A major risk of not paying payday loans in time is that the lender may take legal action. You could even get a court notice. You are bound to show up in court, and ignoring it may lead to bigger and more complicated problems.
The judge may order you to pay, and you could also face wage garnishment. It’s best to handle the issue before it reaches the point.
4. Your Credit Score Can Drop
Many payday lenders report missed payments. This can hurt your credit score. A lower score will make it more difficult to get loans or credits. You may struggle to get further loans due to bad credit scores.
How to Avoid Payday Loan Debt Cycles
Payday loans can trap you fast, so you need to be careful from the beginning. With some cautious steps, you can avoid the debt cycle:
- Build a small emergency fund so that you don’t have to take the loan in the first place.
- Create and follow a budget. You should try to avoid unnecessary costs, such as alcohol and tobacco.
- Use credit unions for small loans and payday alternative loans
- Ask for help before borrowing
- Make sure you have proper planning to repay the loan.
Frequently Asked Questions
Can you ban yourself from loans?
Yes, you can exclude yourself from applying for unsecured personal loans. Moneylenders Credit Bureau can help you with Self-Exclusion Listing. If you apply for self-exclusion, then licensed money lenders cannot extend credit to you.
What are the disadvantages of payday loans?
Payday loans are beneficial when you use them safely. However, it can lead to various disadvantages when you don’t utilize it properly. It includes high interest rates, short duration, and impact on your credit score.
What’s better than a payday loan?
While payday loans are good for many reasons, you can also consider other alternatives. Payday Alternative Loans, Credit Unions, or personal loans can be alternatives.
Final Words
Most borrowers cannot repay their payday loans in time and get stuck into a debt cycle. But you can get out of the loan with the above-mentioned effective factors. Create a careful budget, negotiate wisely, and ask for help from friends and family. Hopefully, you’ll be out of loan safely.
