A 5-Step Guide To Getting Out Of The Payday Loan Trap
Getting out of the payday loan trap might be a little difficult, but it is very much possible if you know how to proceed with the right strategies. The great thing about short-term payday cash advances is that they are easy to qualify for and they can help you get some instant cash as and when you need it. In many cases, the approval comes within just an hour. But, the biggest drawback is that these loans charge an extremely high rate of interest. For example, if you borrow $300 for 14 days, you may have to pay over $100 just in terms of interest and other finance charges.
If you fail to make the repayment on the set due date, you are very much likely to be dragged deeper into a quagmire of debt where you will end up paying eight times (or even more) than the original loan amount. In short, it is easy to get into the debt trap caused by payday loans; it is very difficult to get out of it. Following is a brief rundown on some of the necessary steps you can take to get your finances back on track by taking control of your debt situation.
Review Your Finances
When it comes to getting out of the payday loan trap, the first thing you have to do is to do an extensive review of your finances. It is very important for you to have a clear idea on where actually you stand financially. Identify and then block all those holes, where your hard-earned money is leaking from. Do a thorough analysis to get a better understanding of your financial ability to repay the debts in full. If you are struggling hard with your finances and there is no way to arrange enough money to pay off all the debts in full, you should review your payment options. This strategy will require you to prepare a realistic monthly budget, where you must save a certain sum of money to contribute toward the debt repayment. However, you will obviously have to discuss the payment options first with your lenders. If they allow you pay back in small installments over a certain period of time, this can be your opportunity to get out of the payday debt hell.
Prepare An Amortization Table
While you are working on your strategies for getting out of the payday loan trap, the next thing you can do is to prepare an amortization table. Look at how things will go if you follow a particular approach. For example, write it down on a paper how much outstanding balance you will have every next month if you continue extending the repayment period one month after another. Some lenders an extra $100 for every $100 borrowed whenever you request for a one month extension. When you look at the horrible picture on paper, it will either scare you or motivate you to pay off your debts much faster. It will motivate you to cut down your other expenses so that you can pay off the debts in full. If even cutting down expenses is not helping you to save enough, you can consider working overtime or getting a second job to earn extra money. If even that is not enough, consider obtaining a low-rate loan to pay off your extremely high-rate payday debt.
Keep Reminding Yourself Regarding Your Payment Strategies
Just making a payment plan is not enough when it comes to getting out of the payday loan trap; you will have to make sure that you are implementing your plan successfully. In order to avoid the possibility of procrastinations or lack of determination, it is always better to keep reminding yourself that the repayment of your payday debt is your top priority and you have to save enough to meet this purpose. Make sure that whatever plan you are following is a realistic one. If you owe a huge amount of debt, the chances are that it will take at least 2-4 months for you to pay off the same in full (the exact period though will obviously depend on your ability to save and/or earn money to contribute toward debt repayment).
Avoid Acquiring More Debts
If you are serious about getting out of the payday loan trap, the last thing in the world you should do is to acquire more payday debt (or just any form of debt). Give yourself a 2- or a 4-month time, during which you will not borrow any cash advance or just any loan. During this period, you will only be working on to save or earn extra money so that you can get rid of your existing payday debt problems. Many people try to repay their payday debts by borrowing another cash advance, which is one of the most stupid financial moves, as it only pushes the borrowers deeper into the quagmire of debt. Such people often end up getting bankrupt.
Say A Final Good Bye To Payday Loans
Once you finally achieve success in getting out of the payday loan trap, bid a final goodbye to payday lending programs. Take it as your opportunity to learn from your mistakes. You do not need to find out information on our blog on how risky these payday loan programs can be; you have already seen it yourself and faced the consequences. In future, if you need instant cash to met some financial emergencies, make sure you first take a look at the “Risk Factors” section in the “Payday Loan” category on our blog.
Overall, getting out of the payday loan trap requires you to work on specific strategies with strong determination and with a great level of financial discipline.