Why do most people choose to take out Payday loans? In most cases it’s to get some extra cash to help get them to their next payday. In many instances, a payday loan helps with an unexpected emergency. Times when people are most likely to get a Payday loan include:
- Car breaks down and you need to get it fixed in order to get to work until payday
- A household major appliance like the washer or dryer breaks down and you need to replace it
- A family member becomes ill or passes away and you have to make an emergency out of town trip
- Your child breaks his arm or leg playing afterschool sports and you have to pay medical expenses up front
There are some very good reasons why people take out a payday loan. But no matter how important the reason is for getting the loan, there will come a day when it has to be paid back. In most cases, it is due in full at your next payday. However, sometimes if you don’t have it the loaning agency can grant an extension and allow you to carry the debt a little while longer. The most important thing to remember is that they are going to take the amount owed out of your check on your next payday and you will need to plan accordingly. Here are also some tips for paying off payday loans.
Try to Negotiate with the Payday Lender
Your very first option should be to speak directly with the payday lender. Sometimes they offer a hardship program for extenuating circumstances. For instance, you took out the payday loan which is due your next payday, but you got laid off or terminated from your job the day after. You are possibly not going to be able to make the payment to the lender on time. If they have a hardship program it will usually involve extending the time you have to pay back the loan and reduce the amount of the payments. Payday lenders are interested in making money off the loans they make, but they also want to ensure they get paid back. In some cases, they will make alternative payment arrangements to ensure they get their money back. If they do not offer any assistance, there are other ways to work it out.
Consolidate Your Payday Loans
It can be challenging trying to consolidate payday loans but it is possible. There are basically two ways to consolidate payday loans.
- Consolidate through another financing source.
- Consolidate using a debt consolidation program.
Consolidating through a financing Source
By taking out a personal loan you can consolidate your payday loans. This is very handy if they’ve gotten out of hand and become very difficult to manage. It won’t save you the interest you’re paying on the payday loan, but it will break it down into easier to manage payments that are stretched over a long period of time. There are a few options for obtaining a personal loan such as:
- Home equity loan
- Apply for a personal loan through your bank or credit union
- Borrow the money from a trusted friend or relative and agree to pay it back in a designated time frame
Payday Loan Consolidation Programs
There are a few debt consolidation programs that can help you get out from under your load of debt when it gets too big for you to handle. They work closely with lending institutions to lower interest rates and make payments more bearable. Some payday loan agencies do not work with a consolidation program, but it’s always worth it to ask. Sometimes they are eager to work with them because it means they will eventually get their money back, they just won’t get it all at one time. The desired outcome of going through a loan consolidation company is that the payday lender will accept monthly payments from you which they will apply to your debt. Some debt consolidation companies are set up so that consumers pay them a single monthly payment and they distribute it among creditors including payday lenders.
Charge it to Your Credit Card
Using a credit card to pay off a Payday loan is not always the best idea, but it’s better than not paying the debt at all. Interest rates on credit cards are high, but usually lower than those charged on a Payday loan. It’s an effective way to break the amount down into smaller, more manageable payments.
You can also get a cash advance if you have it available on your credit card. Most credit card account holders can take some cash out but there is usually a fee for it. Check your credit card FAQs and TOS to determine if this would be a viable option in your particular situation or not.
Avoiding Payday Loans
Payday loans are a wonderful resource when you have an emergency and don’t have any money available. The trouble comes in paying it back in a timely fashion. It can chip away at your next check and you can end up in a much bigger financial bind than you ever intended. Always weigh the risks of taking out the payday loan before applying. If you have any other available options try those routes first, and use a payday loan as your last resort. Make sure that if you take out the payday loan you will be able to pay it in full according to the agreement you make with the lender. However, recall that there are times when the unexpected occur.
For those who are in a financially tough spot these types of loans can do more harm than good. However, in an emergency situation, they can really help get you the cash you need to make it until your next payday. Weigh out the risks and the benefits of payday loans to determine if it is the right option for you and your family.
Originally posted on Elite Personal Finance