Are You Trapped in a Payday Loan Cycle? Here’s How Debt Assistance Can Help

Michael Collins
July 10, 2020

Payday Loan Debt Assistance

Have you ever been unable to pay back a payday loan when it comes due? If so, you are not alone. Whether you can’t pay back the loan or you can’t pay the interest that comes with it, payday loan debt sneaks up on many people. This debt can only grow if it is not paid and you can risk falling into a “payday loan trap.” To avoid this, it is important to do everything you can to pay it back as soon as possible. Luckily, there are solutions available to you. Let’s jump right into them. 

How to Get out of a Payday Loan 

Budget and Make Adjustments to Free Up Cash

At first glance, it might seem like there is no way you can pay off your payday loan in your current financial situation. You may be waiting on a few paychecks or you don’t have enough cash after paying your bills. However, if you take a closer look at your bank account and spending, you might find some opportunities to free up some cash. Making a budget is a great way to see exactly how you spend your money. For instance, are you paying for multiple streaming services even though you rarely use all of them? Are you spending a lot of money on eating out or on entertainment? Taking a look at how you spend your money can help you find better ways to manage it. Apps like “Mint” and “PocketGuard” can help you create budgets to help you manage your money better.  Creating budgets for the future can also help ensure you can pay off your current loans, as well as preventing yourself from falling in debt later on. 

Extended Payment Plan (EPP)

We all wish there was just more time for certain things. Payday loan debt can come fast and you might not be fully able to pay it off right away. If you feel like you don’t have enough time to pay your payday loan debt you can ask your payday lender about an EPP. Typical payday loans might have you repay the loan within two weeks, but getting an EPP can extend the due date to make it more manageable for you. 

Here are some do’s and don'ts for asking your payday lender for an EPP: 

  • DON’T wait until the day before your payment is due to ask for an EPP
  • DON’T come unprepared when saying why you need an EPP
  • DO consider having a financial counselor negotiate on your behalf
  • DO check if your state requires payday lenders to offer EPPs. 

With an EPP, you may be able to repay with installment loans instead of one lump sum. This can make your loan much more manageable to pay off. At Possible, you have the option to extend your payment deadline right in the app up to 29 days later.

Possible has loans with flexible repayments.

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Restructure Your Debt with Your Payday Loan Lender

If you can’t pay your payday loan, restructuring your debt can be an alternative to outright defaulting on your loan. Restructuring or settling debt is the process of negotiating with your lenders to adjust the terms of your loans. This can include changing your interest rate or the loan amount you have to repay. You can do this directly with your lenders or hire a credit counselor to negotiate on your behalf. Some lenders would rather you pay less of the loan rather than see you default on their loan, so restructuring your debt can be a solution. However, be aware that restructuring your debts can lower your credit score or increase your taxes down the road. 

Pay off Payday Loans with a Debt Consolidation Loan

Payday loan debt might not be your only problem. You might have student loans and credit card debt as well. Paying off your debt with a payday consolidation loan can simplify your debt and might also save you money. A consolidation loan is a bigger loan with a lower interest rate that is taken out to pay off your debts with high interest rates. If you have $300 in payday loan debt, $500 in credit card debt and another $200 in student loans, you can take out a consolidation loan of $1,000 to pay the three debts immediately so you only have to worry about one loan. Debt consolidation loans can help you pay your current debts right away but it can keep you in debt for a longer time, so make sure consolidation loans are right for you before you get one. 

Military Debt Relief

A study done by FINRA Investor Education Foundation found that around 36% of military families struggle with their finances. Fortunately, there are services provided for military members to help manage these debts. The Department of Veteran Affairs (VA) can provide loans to you if you are in need of military debt relief. Likewise, the VA can offer you a Military Debt Consolidation Loan. These loans typically charge a lower interest rate than most civilians find. The VA offers these loans to individuals with low credit and can give you a better repayment plan to repay the debt. Coming back from deployment only to have payday loan debt can be difficult, but organizations like the VA can provide debt assistance.

Credit Counseling for Payday Loan Borrowers

Is managing debt not your strong suit? Well, managing debt is not a strong suit for most people. Many people struggle finding time to manage their debts properly or just simply don’t know how to best do it. However, there are people who specialize in credit counseling and can help you finance your multiple payday loans. Credit counselors can offer you many services to help with your payday loans. Credit counselors can take a look at your finances and advise you on ways to manage your money and your debts more effectively. They can help you create budgets that show you how to spend your money better and how to avoid further debt. As mentioned before, credit counselors can also negotiate with your creditors to restructure your loans to make them more manageable for you to pay. Overall, these counselors can help you pay your current payday loans as well as give you advice on how to manage your finances in the future. Be sure you have the ability to pay these counselors before you hire them. 

Loans from Family and Friends

Are you unsure if you can trust lenders giving you helpful consolidation loans or credit counselors properly managing your finances? Are you not convinced these people have your best interests in mind when helping you with your payday loans? If so, turning to your circle of family and friends that you can trust might be best for you. According to the Federal Reserve, loans from family or friends add up to about $89 billion every single year.

Lending from your family and friends can have certain benefits that you won’t find at institutions. For example, your friends or family members might be much more flexible about paying them back than another lender might be. They might give you much more time to pay off the loan and they also may charge a much lower interest rate, if they charge an interest rate at all. Loaning from your friends and family does not relieve any obligations you have. Your friends or family members still need to be sure you will pay them back. They may have you enter into a loan contract to ensure your repayment term. Loans from family and friends can be much more manageable but, of course, you run the risk of permanently damaging your relationship with them if you cannot pay them back. 

Defaulting on the Loan

At any moment, you may be faced with medical bills, losing your job, or some other unexpected expense or reduction of income. If you have a payday loan you need to pay, you might have every intention of paying it on time, but you are just unable to do so. Whatever the case, failing to pay back your payday loan results in your payment being defaulted. At Possible, a payment is in default if it has not been paid 60 days within the original payment date. 

Defaulting on your payday loan comes with many negative consequences and you should avoid it as best you can. Some consequences can include an increased loan fee as well as your credit score lowering, which may lead to bad credit. Your lender may also give your information to a debt collecting agency, and you may be barraged with letters and calls until you can pay the money back. Also, some states require that defaulted payments be reported and you could legally be prevented from getting another loan until you pay your defaulted loan back. Sounds pretty bad right? While defaulting on a loan may be an option, you should try everything in your power to avoid defaulting on your payday payments to prevent this nightmare from happening. 

Payday Loans and Bankruptcy

Filing for bankruptcy is a way for borrowers to be given a clean slate and start over. However, bankruptcy is not a way for a borrower to have debts forgiven they never had an intention of paying. Instead, it is for those whose debts are growing faster than their income and they need a second chance. There are two ways for an individual to file for bankruptcy. In a Chapter 7 Bankruptcy, your debts are temporarily while you and a trustee work to arrange which of your assets can be sold to settle some of the debts. After a few months, some of your debts may be discharged and you do not have to pay them anymore. A Chapter 13 Bankruptcy involves a “reorganization” of your finances. In a Chapter 13 bankruptcy, none of your assets are sold but you must agree to a payment plan made by the court that lasts from 3 to 5 years. 

If you are completely out of options, filing for bankruptcy can be a last resort means to pay your payday loan debts. While your payday loan debt may be forgiven through bankruptcy, you might lose some property in the process. You might not have a say in what property is sold either. In addition, your credit score will take a huge hit and could take a very long time to repair. Needless to say, bankruptcy can have lasting effects and you properly should avoid it if possible. 

Payday Loans and Your Rights

Surprisingly enough, lenders want their money repaid and they may do whatever they can to get it from you. Thankfully, you as the borrower have certain rights when you can’t pay your payday loans. The majority of payday loans are unsecured loans, which means that your personal assets aren’t used as collateral for the loan. Instead, your credit score is reviewed when deciding if they want to lend you money. Because payday loans are unsecured loans you cannot be arrested if you don’t pay them. Despite this, creditors or debt collection agencies will sometimes threaten you with arrest if you do not pay the personal loan. This is just a scare tactic and is not supported by the law. If you receive a court summons to resolve your debts, you will have to show up to court or else the courts will “defer” the decision and you will lose the case automatically. 

On the flip side, you might give up some of your rights when you fail to pay payday loans. As mentioned earlier, if you file Chapter 7 Bankruptcy you could lose the rights to some of your property. Similarly, if you can’t pay your payday loans, the court can give the lender the right to garnish your wages. This means the lender is given a certain amount of your wages every paycheck until the debt is paid. Ouch. 

Final Thoughts

The world can be unpredictable, but you don’t need me to tell you that. Payday loan alternatives like the ones offered by Possible can offer you the boost you need to help you out of a tight situation. However, sometimes when it rains it pours. Things can get in the way of you paying your payday loans and other debts on time. Even if you have every intent of paying them, some things are out of your control. All is not lost though. There are many solutions to help you pay your debt or make it more manageable. 
At Possible we try to put our customers in the best situation possible to pay their payday loans back. If you are a Possible customer who has struggled to pay your loan back, please consider leaving some feedback on how we can improve our process.

Michael Collins

Michael has a passion for writing and has since brought that passion to Possible. He enjoys reading everything there is to know about film, sports, and finance. His studies in college allow him to be on the forefront of business knowledge so he can better inform his readers.

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