The payday loan trap starts with the best of intentions. You’re in a bind, credit cards are maxed out, and friends and family are unable to spot you the cash. Taking out a small loan from a payday lender, is seemingly quick and easy since you don’t have to go through a credit check nor offer up collateral, and you can get funds in as little as 24 hours. You are confident you can pay it back at the end of the two-week term. Easy peasy.
But when the deadline comes around, you are still a bit short, so with a “small fee” of $25-$45, you can extend your loan, and as a precaution, your lender who already took your checking account information when you signed up for the loan, will automatically withdraw the amount you owe or you can certainly pay another extension fee, if need be.
Even after just a few weeks of this cycle, with Annual Percentage Rate APR rates of 300% or more, it becomes almost impossible to get your loan paid down.
While there are some state laws that safeguard against lending abuse, you will need to take steps to pay back your loan. Ignoring it is not an option.
Stop borrowing. Don’t beat yourself up for being in this situation; many people fall into this trap, but you must commit to stop borrowing, and focus on sticking to a budget and clearing your debt.
Cancel the automatic deduction from your checking account
You gave your payday lender permission to deduct payments from your checking account when you signed up for the loan. Besides the withdrawals themselves, you may suffer from Non-Sufficient Fund (NSF) fees every time you bounce a check, which again, can result in a massive amount of debt. Contact you bank to cancel the automatic deduction; you will have to deal with the consequences with your lender of not making your regular payments, but it will stop the deluge of NSF fees. Make sure you let your lender know that you have canceled these automatic deductions.
Review budget. This can be extremely overwhelming to start, but there are many budget software programs and apps that are free and can be accessed on your phone such as ClarityMoney, DollarBird, LearnVest, Mint and Mvelopes. Start by looking at monthly bills such as rent, cell phone and electricity, and save your receipts so you can figure out how much you spend on variable expenses, such as groceries, fuel, clothing and entertainment. While this step is intimidating and the desire to put it off will be strong, it’s really the only option you have to get yourself out of debt. If tackling this alone seems overwhelming, a creditable loan consolidator like RealPDLHelp, will walk you through this process, starting with a free consultation.
Get real with your spending
Once you can see where all your money is going, you may be able to identify places where you can cut back, such as with dining or entertainment. Are there expenses you can negotiate – such as a lower auto insurance premium, cable subscription or cell phone plan. Do you have other expenses, such as medical bills, credit cards or other loans that can be renegotiated into more manageable payment plans that would free up some cash to go toward your payday loan. Remember, every bit counts.
Or you may some tough decisions to make. Should you cancel cable altogether, sell your car or get a roommate? None of these are optimal, with a focused goal of getting out from debt, there is a light at the end of the tunnel.
Negotiate with your lender
While it seems easier to just ignore these payday loans, working with them will behoove you. Talk to them to figure out a more affordable payment plan. The more you communicate with them, the less likely you will be taken to court or suffer from more dire circumstances like bankruptcy.
Getting yourself out of this debt cycle is no doubt stressful. If taking the above steps seem overwhelming and even frightful, the best decision is to work with a rated loan consolidation provider like RealPDLHelp. These experts know the industry in and out, and will get you back to controlling your finances and life, instead of being buried under them.