Payday loans can typically be difficult to pay back for a variety of reasons. Paying off payday loans with installments can make paying payday loans off much easier.
In the world of personal finances, loans are one of the single most used financial products that millions of people use every single year. Loans can help you to buy your house, your next car, or to help make ends meet if there is an unexpected cost or an emergency payment. Loans can come in many different amounts and can be used for many different things. Because of the many things loans are used for, there are many different types of loans. Say you need a cash advance before you get your paycheck. One such loan that can help with that is a payday loan.
A payday loan is a loan that is typically less than $500. They are loans that usually must be paid back within a week or two or by your next ‘payday’ hence the name ‘payday loan.’ If you have a bad credit score, these are some of the only loans you might have access too as these are some of the few lenders that lend to borrowers with bad credit scores.
The payday loan industry is an industry that is well known for its predatory practices. By predatory practices we mean that many payday loan lenders have been in trouble by the law for practices meant to harm their customers. For example, many payday lenders try to push their customers even further into debt so that they must take out even more debt to pay off their old debt. This has caused many people to be greatly harmed financially, so much so that payday loans are banned in some states like New York.
Overall, payday loans tend to be harmful to the customers. Payday loan lenders require customers to pay back their loans very quickly and charge very high APR’s (Annual Percentage Rate), both of which make the payment for the loans harder to pay off. If the borrower cannot pay off the payday loan, they might have to take out another loan or default on their loan, which will ruin their credit score even further.
Since paying payday loans the normal way can be hard to pay off, being able to make installment payments for your payday loan can make it much easier to pay your debt off.
Typical loans like mortgages, auto loans, and other larger personal loans are installment loans. This means that the loan principal as well as the interest are paid off in equal installments that are paid weekly, monthly, or quarterly depending on your loan terms. Instead of having to pay off your entire loan amount plus interest all by your next payday like you have to with payday loans, you can pay your loan off with smaller, much easier to make payments over time. This is why paying off payday loans with installments is much easier than paying off payday loans the typical way.
For example, let’s say you are taking out $500 worth of debt from a payday lender. If you were paying it off normally, you would likely have to pay the original $500 you borrowed from the online lender as well as roughly $75-$100 or more in interest. You would need to pay all of this back within a week or two. See how this can be a problem? If you are normally struggling to make ends meet without having debt over your head, trying to make ends meet while also trying to completely pay off your debt can extremely stressful and burdensome.
Instead of this, you can instead pay it off with installment loans. Instead of paying the $500 and $100 or so in interest in a week or two, you can split up the payments over the course of 4 or more payments depending on your teams. Obviously, making payments of $150 or so a week is much easier than paying $500 plus interest back in one week. This is why paying off payday loans with installments is much better than the traditional method.
Because there are so many types of loans, loan amounts, and so many different lenders, it can be difficult to know exactly where to turn if you are in need of cash. Because of this, it is important to be well informed about every type of loan so you can make the best financing decision for you. Debt is something that should be taken seriously so it’s important you do your homework!
We already went over many of the benefits of paying loans off in installments and how they outweigh typical payday loans, but let’s look at the other side as well. Let’s take a look at both the pros and cons of paying off payday loans with installments!
There is a chance that you are unable to pay off your payday loan with installments. In that case, you will need to look for other ways to pay off your payday loan so that you do not miss any payments and hurt your credit score as a result. Let’s look at some alternative ways to pay off your payday loans so you know you have options if you are in trouble!
An extended payment plan, or an EPP for short, is a plan that you and your lender can come up with to make your repayment plan easier by extending your payments to some extent. Here are some do’s and don'ts for asking your payday lender for an EPP:
Overall, an EPP can really help you to pay off your loan. Make sure you ask your lender nicely and be considerate when asking to have the best chance of your lender giving you an EPP.
While it may be uncomfortable to ask, your family and friends are a great resource if you ever get into a pinch financially and are unable to pay off your payday loans.
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.
While it may sound counterintuitive, taking out more debt to pay off your current payday loan may actually be a smart move and could save you money as well. With debt consolidation, you are essentially getting a larger loan to pay off your current debts. If you have multiple debts to worry about, you can pay off many at the same time with a consolidation loan. You then only have to worry about one loan. If you can consolidate your loan with a loan that has a lower interest rate or is easier to pay off, you could be saving yourself a lot of money and a lot of unnecessary stress by consolidating your loans.