Sense & Centsibility Blog

Payday Loans: What Are My Options?

So you've found yourself struggling from paycheck to paycheck and then something unexpected happens...your car breaks down, you have to bring your dog to the emergency vet, etc. The unexpected expense then breaks your budget and you don't know what to do. Many people turn to payday loans, which can seem like an easy way to get cash quick, but there are usually more pitfalls to payday loans than benefits. If you haven't taken one out yet, I highly recommend NOT taking one out to avoid extremely high interest rates/charges, payments that are not affordable, and a cycle that's difficult to break.

But if you already have, what's done is done so this info is here to help you...

Consumers using payday loans may find themselves unable to repay the loans on the due date, resulting in a spiral of ever-renewing loans. Or, they add new loans to make payment on existing loans. Many fall behind on priority expenses such as mortgage/rent and utilities, or end up with negative checking account balances causing other checks to bounce. Remember: it can constitute criminal fraud to take out a loan if you know you cannot repay or do not intend to repay. However, if you intended to repay the debts but were unable and are committed to ending the cycle of payday loans, here are several options that may stabilize your situation:

1. Increase your income or reduce your expenses to allow payment on the loans. Do NOT stop paying on priority expenses such as rent, utilities, food, insurance and medical care. That will likely create more financial crises, not less.

loan trap

2. Find funds to pay off the payday loans in full. Use savings, use tax refund, sell assets, get help from family, or other resources.

3. Seek advice from a bankruptcy attorney about the possibility of bankruptcy protection. This option may be most practical if you have a substantial amount of other unsecured debts. This would be a last resort consideration.

4. Consider if a debt management plan through a reputable credit counseling agency (like LSS Financial Counseling) may be workable. This would have to be discussed with a befinancial counselor to determine if it's your best option.

If you're still not quite sure what to do and need help breaking the vicious payday loan cycle, call LSS for advice on your individual situation.

 If you want to get rid of your credit card and payday loan debt, a Debt Management Plan (#4 above) may be the answer. It provides faster repayment and typically reduces payments and/or interest rates, which will save you a lot of money. To find out if the DMP is right for you, call us at 888.577.2227 for an appointment with one of our financial counselors. Or to get started online, click our logo button below. Get started on your path to becoming debt-free for good!