It doesn’t matter how it happened. Maybe you needed extra cash to pay for an unexpected expense, make ends meet until your next payday, or wanted to make the holidays extra special for your loved ones—you’re not alone, studies have found that roughly 12 million Americans take out a payday loan each year. Whatever the reason, you now find yourself with multiple payday loans to pay off with multiple loan providers. Of course, it’s not an ideal situation to be in, but it’s not the end of the world either and, as so often happens in life, there are several paths forward and out of debt.
In this article, we’ll be looking at some of the options you have to reduce, pay down, and, ultimately, eliminate the debt you now find yourself in. Before we begin, however, let’s start with a healthy dose of honesty: there are no silver bullets in this article that will wipe away your debt or payday loan amount without a bit of work on your part, and it would pay to be skeptical of anyone claiming to have such a solution. So, with that out of the way, let’s dive right on in!
The first step in making any plan is to determine where you are starting from, and the path to dealing with your payday loan debt is no different. If you haven’t already, you’ll want to account for your financial inflows (income) and outflows (expenses). Outflows, in particular, will be important to get a handle on because, while income is relatively inflexible in the short term, expenses can be more elastic.
Once you have a list of all your expenses, you will want to break them down into two categories: essential expenses and non-essential expenses. Essential expenses include those things you cannot do without (rent, food, childcare, etc), while non-essential expenses encompass the luxuries you enjoy in life (a Netflix subscription, dining out, the latest phone, etc). The aim of this exercise is to identify non-essential expenses you could temporarily forgo to free up capital to make payments on your debt.
It is important to emphasize that these austerity measures would only need to be observed until your payday loans are under control. After all, we all deserve a little bit of luxury in our lives no matter our financial situation. That said, sometimes such cost-cutting is not feasible which means you’ll need to consider some of the other options we’ll discuss later. At the very least, this exercise will give you a better understanding of your financial situation and the part your payday loan debt plays in it.
While examining your financial situation, you’ll want to evaluate the loans you currently owe money on (how much each payment is, the annual percentage rate [APR], and when you have to pay it back)—knowledge is your greatest ally in this instance. With this knowledge, you can create a list of your outstanding debts and the interest you are paying on each of them. To save yourself money during the repayment process, you will want to focus on paying back the high-interest loans first if at all possible. By structuring your payments this way you save yourself a bit of cash along the way as you are preventing the higher interest rate from creating a larger and larger payment down the road.
To aid in properly ordering your repayments, it will be helpful to reach out to your lenders to see if an extended repayment plan is available on your lower APR loans. It may come as a surprise, but it is in the best interest of your lender to make sure you are able to repay your debt to them, and they can often be quite accommodating when push comes to shove. By pushing out the repayment dates on your lower APR loans you give yourself breathing room to deal with the higher APR loans more immediately.
Most of all, communication will be your best friend in dealing with your lenders. While most payday lenders do not report on your credit, they can send your debt to collections agencies who will. As such, if you want to avoid negative reporting on your credit, you will want to reassure your lenders directly of your intention to repay them. That said, sometimes, the collections agency your debt is sent to is willing to settle for a lesser amount than was originally owed, so it could be a calculated risk on your part. Of course, this is a risk that we will neither endorse nor condemn—it’s a decision you will have to make for yourself.
Maybe restructuring your payments or cutting expenses isn’t enough. That’s perfectly fine; there are plenty of other options available to you. One of the most interesting of these options is the refinancing and debt consolidation of your existing payday loan debt. The idea itself is fairly simple and works much like a credit card balance transfer: you use debt to pay off debt with the intent of getting more favorable terms.
Typically, paying off debt with even more debt is not an advisable course of action. Indeed, even in the case of refinancing, you’ll want to carefully consider your options. To start the refinancing and debt consolidation process, you secure a personal loan with which to pay off all or some of your outstanding debts on better terms than your original payday loans. The advantage of this loan agreement is twofold: it allows you to secure a lower interest rate than what you were previously paying on your payday loans, and it means you only have to keep track of a single set of payment dates. The latter point should not be underrated; not having to keep up with an unrelenting set of monthly payments from different lenders is psychologically freeing.
Of course, the big question is where can you get a personal loan with which to cover your outstanding debts. One popular option if you are a member of a credit union is a PAL (payday alternative loan). These PALs—as the name implies—are small-dollar loans designed to be a healthier alternative to payday loans. PALs often offer a lower interest rate and a more generous payment structure than you would find at a traditional payday lender.
The only catch with PALs is that they require an existing relationship with a credit union. Typically, this means that you have been a member of the credit union for upwards of one month and have an active checking account. Consequently, this option may not necessarily be feasible if you find yourself with immediate debt obligations. Never fear, however, traditional financial institutions also offer personal loans that could serve to aid in the consolidation process—just be aware that, like any mainstream loan, your credit will be run to evaluate your eligibility for such a loan.
It is also important to remember that you don’t have to face your debts alone. Especially in modern times, it is all too easy to feel that it is you against the world, and such a feeling of isolation can be immobilizing. Don’t let yourself fall into this mindset; there are resources out there to help you through this financially challenging time in your life. Here are a few of the most useful ones:
Debt assistance in the form of credit counseling is a great place to start if you find yourself lost in the sea of options. The process is quick and easy, you set up an appointment with a debt credit counselor who evaluates your financial situation and helps build a debt management plan. Often, this will include consolidation of your debts into a single loan and preventing creditors from harassing you for payments.
One word of warning, however, be aware that credit counseling sometimes has a cost associated with it. It is possible to find low-to-no-cost programs but you’ll have to do some digging for yourself. Furthermore, you’ll want to be alert for any potential scams, as it has been known to happen with less-than-legitimate counselors. As a general rule whenever it comes to your finances, make sure to do your own research before committing to a certain plan of action—it pays to be better safe than sorry.
This option is a bit more sensitive and situational: asking your community for help. Whether this community is your family, your church, or wherever you find support when times get tough makes no difference. This group has supported you through thick and thin, and they could be a tremendous help in the dire financial straits you now find yourself in.
You will, however, want to carefully evaluate whether asking for financial assistance from your community is for you, as financial obligations to another person/people can complicate relationships. Such a relationship will need to be built on mutual trust and the understanding that you will fulfill whatever agreement you and your community come to. Treat any obligations you make with your community as a binding business agreement—it isn’t worth souring your relationships over an unpaid debt.
Debt is a sensitive subject and might not be something you feel comfortable talking to your employer about. That’s fine, but you can indirectly ask for assistance when times get tough. Sometimes this can come in the form of an advance on an upcoming paycheck or extra hours at work to make ends meet. Much like the previous debt relief option, this one is a bit more situational as you might not find yourself in a position where you can realistically ask for these things from your employer.
If you are part of the military you also have more than a few options available to you. Whatever branch you serve in should have a vested interest in keeping you out of debt and often offer free or reduced credit counseling sessions. We won’t go too deeply into this here but ask around and take a look into what is available to you.
If you find yourself getting overwhelmed, it is probably a good time to seek outside help with your debts. We understand that it may not be all that comfortable talking about your financial woes with others but it really can help. You don’t have to struggle alone, and even just talking over your available options can help you better understand what you have to do next.
No matter how rocky your relationship is with payday loan debt remember one thing: there is a way out. The worst thing you can do is fall into a state of inaction. The path forward may not be the fastest or most pleasant one in the world but it is one that many have walked before and you can do the same. Better yet, avoid traditional payday loans and use Possible, a more flexible and friendlier way to borrow.
We’ve gone over a few options available to you when it comes to debt relief, but there could certainly be more out there. Don’t take this article as the end all and be all of debt relief knowledge—we certainly wouldn’t market it as such. Go do your own research, find the option that works best for you, take control of your finances, and put your payday loan debt safely in your rearview.