First things first, you must be well aware of the state and federal laws that regulate this type of lending before you start working on your strategies to pay off payday loans. Small amount of short-term cash advances often become a large amount of long-term financial liability not just because the penalty charges and interest rates on these loans are unreasonably very high but also because many lenders are involved in unfair practices that are otherwise prohibited in many states (such as many state has small rate caps). Therefore, your awareness about your legal rights is the key to success when it comes to getting rid of the viscous cycle of debt that these loans often create. Your ignorance on the other hand can prove to be very costly, as you may end up paying a much higher amount of money than required. You should go ahead with one of the following strategies only when you are sure that everything the lender is doing is fair and in line with the laws.
Strategy 1 – Signing Up With A Debt Consolidation Company
If you unable to pay off the debts with your current salary, debt consolidation can be one of the best strategies to pay off payday loans. As per this process, you have to sign up with a consolidation company, which works as a mediator between you and your payday creditors. They talk to your creditors on your behalf and try to convince them for an affordable repayment plan at reduced interest rate. In most cases, they even manage to get penalty and other charges completely or partially waived off. Once a deal is finalized, all parties sign a written agreement. After that, you just have to make a single consolidated monthly payment to your debt consolidation company, which further disburses the payments to your creditors. There are two problems with this strategy – first, it is very difficult to find a legitimate debt consolidation company, and second, you are required to pay a certain amount of money (which can be substantial) for these services.
Strategy 2 – Do-It-Yourself Debt Consolidation
Debt consolidation is undoubtedly one of the most effective strategies to pay off payday loans, but you do not necessarily need to sign up with a company to use this program. You also have an option to do it yourself. And, the best way to do this is to obtain a big loan to pay off all your payday loan dues. It can be a personal loan or a home equity loan. You can get a new loan at a comparatively very low interest with the convenience to repay in small monthly installments without hefty penalty charges. It is up to you to decide whether you should obtain an unsecured or a secured loan for this purpose – both options have their pros and cons. You can get extensive detail on this strategy here.
Strategy 3 – Charge Your Entire Debt To Your Credit Card
Though in general it is not a wise idea to pay off your debts using your credit cards, the situation here is different. Credit cards do charge high interest rates, but the rates are still very low as compared to what payday lenders charge. Therefore, using your credit card can also be one of the better strategies to pay off payday loans. Obviously, in order to let this strategy work, you must have a credit card with a high enough limit to cover your entire payday debt. When your payday debts are paid off, you will end up having just one debt account (in the form of credit card dues), which you can pay off in several monthly installments. Do not try to avoid your financial liabilities by just making the minimum monthly payments. This strategy can be more effective when you pay off your credit card balances faster.
No matter which strategy you choose to follow, you must do three things to accelerate the process of achieving a debt-free life – first, sigbnificantly cut down your expenses (practice frugality); second, create a smart budget plan and stick to it; and third, increase your income by getting a second job or by working part-time. When you accompany these three things with your strategies to pay off payday loans, you can easily get a lot of extra cash, which will eventually help you get rid of your debt problems at a much faster pace.
