7 Tips To Help You Solve Your Payday Loan Problem

hand holding cashAre you one of the consumers who want to break free of the cycle of living from paycheck to paycheck? This is the type of lifestyle wherein you are always in a state of anticipation for your next paycheck. In the worst of situations, you are spending the money that you have yet to receive in your next paycheck. This type of living can be quite stressful because we all know how uncertain our jobs can be. One minute we have them, the next we don’t. If you are living from one paycheck to the other, you may or may not receive the next. What will you do with the debt that you promised you will pay using your next salary?

If this scenario scares you, then you need to seriously consider if you will push through with a payday loan or not. This type of loan is a short term loan that has one of the highest interest rate in the lending industry.

Payday loans allow you to borrow an amount of money that has to be paid back in mere weeks or even months. According to the data provided by ConsumerFinance.gov, ⅓ of the payday loans are paid within a month. 12% are paid weekly while the rest are split between semi monthly or bi-weekly. It is that short. In most cases you have to pay it back in full when the next payday comes in – thus the term payday loans.

7 tips to help you get out of a payday debt cycle

It is very easy to fall into the debt cycle when you borrow money from payday lenders. It is probably safe to say that it can lead you to one of the financial disasters that you should avoid at all costs. But if you have gotten yourself in trouble through this loan because of an emergency that you were not prepared for, there is hope for you still. Here are seven suggestions that we have for you to help you get out of your payday loan problem.

  • Sell the clutter. It is time for you to comb every inch of your house and sell of the things that you do not need. Go through your clothes and separate those that you haven’t worn in 6 months. It may be time to sell them. You can use the proceeds of your clutter to pay off your loan. Since you want fast cash, this is the best way to get it. Go to eBay or Craigslist to sell the stuff lying around in your house. Decluttering is a great way to clear your mind and help you think of ideas to get out of the debt cycle you are in.

  • Request for a cash advance from work. In essence this is like a payday loan. Only this time, you will not be charged with interest. Of course, you will get a smaller amount in your salary for the next payday (or even more than one to make the deductions lighter).

  • Tap into your 401(k). Now a lot of financial experts will raise hell for this but considering how you are being buried by the high interest of your payday loan, this is the lesser evil. The money in your 401(k) is technically yours anyway so why not tap into this resource? It is advised that you make a 401(k) loan – not a withdrawal. The loan will make you pay interest but that money will go to your future self anyway – so it is still better than your payday loan interest.

  • Work longer hours or get a second job. If the three does not work out or are still falling short of what you need, it may be time to spend more hours working. Talk to your employer to ask if you can work longer so you can take home more money. Or you can get a second job. There are several online jobs that you can do from the comforts of your own home. These can increase your monthly cash inflow to help you pay for your debts. Just think about it. Working longer will help keep you from spending money unnecessarily. So it is like hitting two birds with one stone.

  • Adjust your withholding tax. A big tax refund is great but remember that it is like loaning your money to the government without any interest. Do not give it to them in the first place so you can use the money to pay for your needs now. Stop overpaying your taxes so you can benefit from your hard earned money. Go to Human Resources and fill out a new W4. Increase the allowances that are entitled to you.

  • Ask family and friends for help. A family loan is still quite dangerous but not because of the high interest rate. It is more of the strain that you could put in your relationship with the lender. But if you make things official and you stay true to your payments, it should be fine. Just be honest about how much you can afford to pay so you will not disappoint in the future.

  • Downsize your lifestyle. This is the final and the most extreme act that you can do. If you find yourself relying on your payday loan to tide you over until the next paycheck, that means there is something wrong with how you are spending your money. If your income is really too small for your expenses, maybe the answer is to simply downgrade your life. Live in a smaller home, sell your car and buy a bike, or bring a brown bag to work everyday. There are so many things that you can do to lower your overhead expenses so you can pay off your debts.

Dangers of the getting short terms loans

You really need to be careful of payday loans because it can be a tricky debt to be in. The thing about this loan is that the lender will not hesitate to rollover your debt if case you cannot pay it off in time. When that happens your interest rate will skyrocket. In some cases, the interest can go as high as 400%.

An article from USNews.com discussed how payday lenders are targetting low income communities. After all, these are the consumers who are oftentimes quite desperate for some money. They are the household who usually have a deficit in their budget – who are scraping just to survive until the next paycheck comes in.

If you find yourself considering these type of loans, you may want to read about the following dangers that you will be putting your finances through.

  • Payday loans have very high interest rate. It usually runs at 15% to 30% for only a couple of week. The equivalent to that of a full loan with an Annual Percentage Rate is 800%.

  • Payday loans make things worse for the borrower. They “prey” on the desperate consumer who will not mind the interest rate because they have no other choice. They are already financially hard up so their source of debt payment is quite unsure when they get their loan.

  • Payday loans have no limit. This is the danger. Your debt will keep on rolling over until you can pay it off completely. Every time it does, you can expect that your debt will keep on piling up until you are buried under.

Here is a video that discusses a few simple tips about payday loans – as provided by a professional from the Better Business Bureau.

In end, you are highly encouraged to just keep your hands off that payday loan and look at other alternatives to get out of your financial fix. There are other options – you just have to look really well for them.