When a payday loan gets borrowed and the deadline gets missed, to get out of it, you get forced to take an additional loan with increased fees and it keeps on repeating until you suffocate. But with proper planning and strategy, this situation can be avoided.
Focusing On Debts With High Interest:
If the borrower has more than one outstanding loans any other types of debt always try to focus on the biggest ones and pay them off first as they are the ones with the highest interest rates and paying them off fast will help in reducing the total due amounts that you need to pay.
Payday loans being the most expensive ones are often the most tricky to pay off. That can be done by a secured additional income or by asking for help from family, friends or any relief organizations.
Securing An Alternative Source Of Funding:
By seeking help from family, friends or maybe a credit union can help you in paying back the borrowed money.
Although paying off the debts in this manner won’t clear you of the debts, but seeking help and repaying a friend seems more plausible and easy when compared to payday loans because the terms are more relaxed and the interest rates are lower.
Also, there are a bunch of other forms of loans available for different financial requirements and its always advisable to opt for those if the credit score permits.
Extending The Payment Plans:
When signing up for the loan, always request the lender for an elongated payment plan for longer time duration because that will help the dues to be more manageable and with a smaller paying amount over a longer time, though you may now have to bear the loan for a longer time, but now you will have more funds and time to pay it off so that it doesn’t choke on you.
Also, this diminishes the chances of defaulting so the lender will not keep levying any additional fees.
State Regulator Interventions:
It so may happen that the lender is reluctant to agree on your requests, and declining any talks of extending the payment plan. In that scenario, it is necessary to take up the case to the regulatory agencies which regulate the lenders in that specific state.
State regulators can be really helpful and they can act as a negotiator to agree upon a payment plan with the licensed payday lenders. Also, if the lender is found out to be unlicensed, actions are also taken against those illegal payday lenders who give payday loans unethically.
Dragging the lending companies through legal ways by filing formal complaints with the Consumer Financial Protection Bureau helps if the lender doesn’t wish to chalk out a payment plan.
Relief Camps And Faith Organizations:
The US is witnessing the setting up of many faith-based organizations across the country whose work revolves around helping many borrowers who are struggling with the debt cycle.
These organizations pay off one’s entire debt in total and the borrower can pay off the amount over a relaxed period of time in convenient installments, sometimes even without any fees or interests. Men serving in Military have their own portals and options like these set up by military veterans as well.
Plans Related To Debt Management:
Debt counseling agencies and management houses specializing in debt management offer a service called DMP or Debt Management Plan where they negotiate with the creditors to decide upon a monthly payment scheme as per your convenience.
The borrower will deposit that amount in the agency and they will pay the bills. However, usage of credit card is forbidden in this situation and FTC reviews all the terms before coming in a contract. However, this is not an easy way out but the DMP can take many years depending upon the amount of debt.
Opting for a loan which has a lower interest can be taken to pay off the debts with high interest. Credit Unions often gives such offers which can be taken to combat the payday loans. Personal Loans are another mean and many people go for the same.
But a bad credit score won’t be enough for these alternatives so a no credit check installment loan, which generally has lower interest rates and a longer time period than payday loans can be the best alternative as they also help one to rebuild the credit score.
Balance Transfer Enabled Credit Cards:
These kinds of credit cards are very helpful as they let your debts to move aside with the expense of little to sometimes no interest in a specific tenure. For instance, a balance transfer enabled credit card sometimes offer 0% APR for almost 15 months which means granting a buffer time of 15 months for paying the interest.
For availing this card, you have to search for such a card which enables you to transfer the debt amount and then after a comparison you have to consider your options that may prove the most beneficial to you. But a fair credit score is required for the same.
It is not always so easy to escape from the grasp of a bad credit payday loan, but also it’s not impossible. If you can strategize and consolidate your payday loans and work towards paying off the debt, it is definitely possible to get out of the debt spiral.