Tips for Getting Out of the Payday Loan Trap

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A payday loan is one of the most popular loan options that you can find on the market today. This loan is very popular because it can be approved quickly and easily. However, this loan has a high-interest rate and a lot of fees.

Most people are going to pay more in fees than what they borrow. More than half of the payday loan customers are struggling to make monthly payments on this type of loan.

Therefore, you have to learn about how you can escape and avoid this payday loan trap easily. In this article, we are going to share some useful tips on how you can reduce your payday loan effectively.
Many payday loan organizations are considered as predatory lenders for a lot of reasons. Many states have already banned these organizations. According to the Pew Research, most payday loan borrowers are going to spend about $520 in fees and interests on the loan of $375.

Most payday loans have a high-interest rate that can be up to 390% annually. This interest rate is about 10 times higher than the regular credit cards or personal loans. It can be very difficult for you to get out of this trap if you don’t know how to do so.

You need to find the best way of working out to achieve your financial independence. Here are some alternatives to payday loans that you can try today.

Payday Loan Alternatives

a. The Earnin app

This app is one of the best answers for you who want to get out of your loan. This app allows you to get up to $100 on your paycheck. This loan is available without fees and traps that are associated with the payday loan. You can use this loan for paying off your payday loan, so you can avoid any fees or high-interest rates. However, some limitations apply to this loan option. You should see all terms and conditions before taking this loan.

b. Personal loan

It allows you to borrow a large amount of money with a fixed monthly payment. If you are serious about getting out of your payday loan, you can consider taking this personal loan. It can be a better way of getting ahead with your money, especially if you want to achieve stable finance in the future.

You should calculate the monthly payment that you can afford over the payment period from this personal loan.

c. Debt consolidation loan

This is another loan option that is available on the market today. You can find a lot of companies that offer this debt consolidation loan for all customers. This loan usually has a lower interest rate than the payday loan. When you take this consolidation loan, you can take a new loan for paying off your payday loan. Then, this loan can be spread away for more than a year, so you can have a low monthly payment. It can be easy for you to manage your budget when you take this loan.

d. OppLoans

It is a popular alternative to regular personal loans or payday loans. This company doesn’t look at your credit score. Your application can get approved quickly, so you can get immediate cash for paying off your payday loan.

This company can lend you money without super-high interest rates or fees. However, this type of loan has higher fees than regular bank personal loans.

e. Credit card

You can use a credit card for borrowing money for paying off your payday loan. Most credit cards usually have lower interest rates than regular payday loans.

If you have a credit card debt, you can also consider using the balance transfer credit card, so you can transfer the balance to other credit cards without interests or fees.

A credit card can be a perfect option for you who want to get out of your payday loan without paying high-interest rates and expensive fees.

Ask for the Extended Payment Procedure

If you are trapped in the payday loan and you cannot pay back on time, you can consider taking the extended payment plan. This plan allows you to make some payments for an extended period.

You can take a look at the National Conference of State Legislatures, to find out the state laws regarding the payday lenders. This documentation can be a perfect resource for you who want to get the extended payment plan for your payday loan.

How to Stop Paying Payday Loan Legally

This is the last option that you can do, especially when you don’t have any solutions for your payday loan. There are a few ways that you can take from the legal perspective. Here are some useful tips that you can follow, so you can stop paying the payday loan legally.

a. File for bankruptcy

If you cannot make your payments on the payday loan at all, you can consider the bankruptcy process. Filing a petition of bankruptcy can be the last option that you can take, to stop paying your payday loan.

When your bankruptcy process is done, any creditors should cease collection activities. You may need to make payments on any of your debts through the trustee.

In the chapter 13 bankruptcy case, the trustees will pay priority debts first, including auto loans, mortgages, and taxes. Then, they will make payments on other non-priority debts, such as payday loans or credit cards.

b. Contact the State Regulators

Although the state regulators cannot help you stop paying your payday loan, they can help you with some consultation sessions. You can consult with them for talking about your situation.

These state regulators are ready to help you work with your payday loan lenders, to find the best solution for your problem. State regulators can help you negotiate the payment plan with your licensed payday loan lenders.

They can recommend some of the best steps on how to get out of the payday loan trap legally. State regulators will also take legal action against any unlicensed lenders of the payday loan.

Conclusion

We hope you find several tips to avoid getting into the payday loans trap, and how to get out from there. If you still have any questions or need a consultation, we recommend seeking professional financial help.

This article has been financially reviewed by Ben Heir, CFA on .

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Author

Philip Horton

Philip Horton

Philip is the Head of Content for OnlineMoneyPage. He is responsible for researching and writing articles. He is also one of the co-founders of OnlineMoneyPage.

He is an experienced finance professional with a proven track record in the field of financial advisory. He has a proven history of success in clients’ personal finance planning. His core competencies include: Financial Planning & Analysis, Budgeting & Forecasting, Financial Modeling, Income Streams Improvement, and more.

Philip holds a MA degree in financial management and is a CFA and CFP charterholder.

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