Payday Loans Debt Consolidation

8 Very Practical Steps On How To Get Out Of Payday Loans

The financial emergencies that you once had are now over, but you are still not through with your payday loan debt. In fact, the chances are that you are in a worse kind of financial emergency because of those loans that were initially supposed to be your best friend in need. It is not at all an easy task for a person who lives paycheck to paycheck to get out of payday loans easily because the interest rates that are charged on it are very high. Things become worse when you fail to make the repayment in time, as it results in a hefty amount of late fees and an array of other penalty charges (such as bounced check fee). Things can be worst if you keep on taking new cash advances either from the same lender or from a different one just to pay off the previous dues. It soon becomes a viscous cycle of debts within a couple of months. So, the first thing first; you have got your lesson – payday loans can never be your friend in need; they are in reality your enemy in disguise. These loans are there to suck you, not to help you. Having said that, you do not have to feel hopeless. Here are the 12 practical steps on how you can get out of such debt traps. But remember, the return journey is not going to be an easy one. You will have to show some great financial discipline and have to be very serious and consistent in implementing the strategies that have been described below.

Step 1 – Don’t Panic

I have said that already, but I am saying it again because this is the first step. The more you keep on worrying, the more difficult it will be for you to get out of payday loans. You need a calm head to work on your strategies. You will do no good to you by beating yourself up for getting into this debt trap. The fact is that it has already happened. You made a mistake. Now what? The best thing you can do now is to think of a recovery plan. Last time, you were not prepared. Make sure, this time you do not repeat the same mistake.

Step 2 – Make Necessary Arrangements To Ensure There Is Always Sufficient Fund In Your Bank Account

By far, you must have learnt it – if checks keep on bouncing, it is going to cost you a fortune and your already bad situation is going to be worse. Therefore, it is very important for you to make certain arrangements so that there must always be money in your bank when it is time for check clearance.

Step 3 – Face The Facts

If you seriously want to get out of payday loans, you must face the facts. The third step is to do some calculations on a spreadsheet. Write down how much you currently owe and how much it will become over time (after one month, after two month, after three months) if you keep on defaulting. You have the loan agreement that explains the rate or amount of interest, different types of penalty charges and when they are applicable. When you do this calculation on a spreadsheet, you will see a scary picture when you find out that your outstanding dues can just become double or more within a matter of just a couple of months. But remember, the idea behind this third step is not to get scared but to get motivated. When you see (literally) the future on paper, you will have a solid reason to get serious about the repayment as fast as you can. Every minute of delay is pushing you into a deeper debt trap. So, you must act immediately.

Step 4 – Use Your Legal Rights And/Or Negotiation Skills To Finalize An Affordable Repayment Plan With The Creditor

Many states have specific to help the consumers to get out of payday loans. There are also legal provisions on and how much the lenders can charge. The more you are informed about these laws, the better you will be able to work out your strategies. Awareness about your legal rights is going to be a big plus for you when you contact your lender to negotiate an affordable repayment plan. Payday lenders often take undue advantage of borrower’s ignorance and they sometimes even get involved in activities that are prohibited by law, such as charging a much higher rate of interest than allowed (here’s in your state). If you find out that your lender is also doing any such thing, you can with your state authority and get further help. If you approach this step the right way, you will definitely be able to at least work out an affordable repayment plan. Your chances of winning the negotiations are brighter if you show your willingness to pay a certain percentage of the total outstanding due immediately. Do not forget to bring all necessary documents with you in support of your claim. When you are well prepared, your creditor will definitely show interest in your proposal. They may not accept your first proposal. So, make sure you have a second and third proposal ready with you. As soon as they reject one proposal, you must request them to consider a second proposal that obviously must be a little more favorable for the creditor.

Step 5 – Start Making Your Loans Smaller

If you are not in a position to get out of payday loans by paying off all dues at once, you should focus on a repayment plan that allows you to make your loan smaller with every passing month. It means you just cannot afford to make further defaults anymore (especially after your lender has agreed to a repayment plan in monthly installments). To ensure this, you will have to do some serious budgeting, where the basic concept is to raise your income to as high as possible, to cut down your expenses to minimum, and to stop acquiring more debts. Make some smart compromises with your spending habit and focus all your energy on the repayment of these scary debts – it has to be your first priority.

Step 6 – Create A Cash Cushion

The above five steps will definitely put you on your way to get out of payday loans, but there are still three more crucial steps remaining. First, while the repayment plan is still on, you must now create an emergency fund, a cash cushion, so that you should never have to borrow those alluring yet risky cash advances again. Here’s and use it as the best alternative to payday loans.

Step 7 – Whenever You Borrow From Your Emergency Fund, Make Sure You Pay Yourself Back

This is what we mean by financial discipline. It is true that you are the owner of your emergency fund and the money it has is all yours, but in order to keep your finances always on track, you must pay yourself back every time you take some money out of this fund. The idea is to maintain a minimum balance (say of $500) in it.

Step 8 – Reduce Your Chances Of Getting Trapped Into Financial Emergencies

Believe it or not, you can easily avoid getting into many financial emergencies, if not all. For example, if you take care of your health, such as follow an exercise regime, follow a healthy diet, and follow a healthy lifestyle (no smoking, no drinking), you can minimize your chances of getting ill, which means reduced chances of having unexpected medical bills. Likewise, if you are up-to-date with your routine car maintenance, you car is less likely to demand major repair works at a time when you least expect them. The idea is to plan ahead of time. Financial discipline is all about keeping yourself prepared, always.

Overall, if you follow these 8 steps, you will not only be able to get out of payday loans, but you will also be able to avoid future debt problems.

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Posted in Managing Payday Debt, Payday Loans, Payday Loans Debt Consolidation, Repayment Strategies | 1 Comment »

One Response to “8 Very Practical Steps On How To Get Out Of Payday Loans”

  1. john says:

    These 8 steps can be rules for the one who want to get rid off the payday loan. If he/she will follow these rules strictly, he will surely get out of these debts. Always remember the first point. If you can not keep a positive attitude then the journey will become more and more difficult for you. Bounce checks leave a very bad impression of your financial status so sufficient amount in bank is always necessary. One more basis fact is Budgeting; every body should be very clear about how much money is coming into one’s home and where and how it is going out. If there are big holes through which your hardly earned money is leaking then you have to shut down the holes. Never miss the installment, the situation can become worse when we miss the payment due to accumulation of high interest. In case of inability to pay, you can talk to the creditor and can decide affordable repayment policies. There are many laws to help you for this, just be in touch with these rules and regulations.

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