Published On: Tue, Oct 9th, 2018

How to Get Out of the Payday Loan Cycle

Have been caught up in a situation that requires money urgently?  It’s worst if you have nothing in your bank account. For most people, going for a payday loan is the fastest and easiest way to solve financial emergencies. While it may be easy to acquire these loans, getting out is often difficult.

photo supplied/ bankruptcydocumentslibrary.com/

Here’s how it goes; you take a loan with the hope of paying it back on your next payday. When the payday comes, you have the option of paying a fee to carry the loan, plus the interest it’s accrued to the next payday. If this trend of carrying the loan to the next payday continues for a few months, the interest builds up fast, exceeds the loan and there you are trapped. This leads you to a cycle of debts that makes it impossible for you to escape.

Payday loans are small unsecured loans with high interest rates and which are taken with the intention of paying back on a payday. Despite their small amounts, they can save the day when you find yourself in a fix. Once you realize that you are sinking deeper and deeper in debt, the best option that most people go for is payday loan consolidation; a very effective loan debt relief plan that has helped many Americans end the cycle of payday loans.

Millions of Americans are trapped in payday loans. But it’s not terminal. You can turn the situation around. Here’s how:

1.    Acknowledge that you have a problem

Payday loans are marketed for financing unforeseen one-off expenses. However, most people who take them use these loans for daily essentials like gas and food. Others take the loans to repay other loans. If you are struggling to get out of these loans to no avail, do not panic because you are not alone. Simply analyze your finances and get to understand why the borrowing habit is not fading away. The payday loan is not the problem but the reason for taking it is. Could it be that you find it difficult to stick to a budget? Or you find it difficult to set aside funds for emergencies? Whatever the case, it is important to understand the cradle of everything. This is the first and most important step to getting out of payday loans.

2.      Avoid taking more debts

If you want to get out of a hole you’ve got to stop digging. It’s the same principle with payday loans. Having paid one loan, most people feel like they have the capacity to manage another payday loan and therefore take one more loan and then another, and the cycle continues. Continuously taking one loan after another may seem like a quick fix to urgent financial needs but in reality it only sinks you into debts. You’ve got to end the cycle.

3.      Note and track your expenses

What are your daily, weekly, monthly and annual expenses? How much do you need to put aside on a monthly basis to service your payday loans? If you have no idea how to track your expenses you can keep a notebook where you record all your spending. You can as well enter your receipts onto a spreadsheet daily. Thanks to technology, you may as well record all your expenses using an application on a Smartphone. Remember any plan built on information that is not accurate is likely to fail. So whatever method you go for, and be honest about it.

4.      Cancel the Continuous Payment Authority payday loan payment

During the loan application, you presented your card details to have a continuous payment authority. This is a direct link to your bank. The payday companies can therefore take their share of your wage every payday. You might get bank charges if the money is not in your bank. You therefore need to cancel the CPA if you cannot afford it. To cancel, call the bank requesting them to cancel the payday payment. Do not fall into the trap of taking a new payday loan with new charges. When you reach to an agreement, keep your commitment until you have cleared all your debts in full. If you feel you are not getting the corporation you need, you can seek help from a ‘not for profit credit counseling service’. They have sufficient knowledge to assist you through the process.

5.      Bite what you can chew

It is impossible to repay more than you can afford. You can get debt remedy tools that can help you know how much you can afford to pay. These tools give free advice regarding debts. The debt solution and money management tools will help you develop a sound financial plan to get you out of debts.

  1.      Live a debt free life

As you repay your payday loan as per the set agreement with your company, you can look for other avenues to make money other than your usual day job. Some of these avenues for more income may include;

  •         Renting a room in your house
  •         Putting your skills to use
  •         Spend less than you earn
  •         Start using coupons
  •         Stop eating out
  •         Have a yard sale
  •         Work overtime

The bottom line

Get in touch with people who can help you to plan your finances and budget for the most important things. They should be able to help you plan for future payments and offer debt solutions to manage your debts in the long run. Money issues can really affect your financial and mental wellness. The earlier you face your financial situations and break the vicious cycle of payday loans, the better your financial foundation will become.

You will become more productive all round and greater ideas to grow your finances will start flowing through. Be open to learning fresh money making skills. Take pride in every progress you make.   If you need more information on how to get out of payday loans, feel free to get in touch with us.  

Author: Yanelle Prieto

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