Q. Because of family emergencies the last couple years, I messed up and took out payday loans. I have seven and the interest is so high I’m falling behind on household bills now. I owe $3300 and pay $674 every two weeks in interest. What can I do? I make good money now but can’t get ahead with these payday loans.
Payday loans can be vicious cycle and hard for consumers to escape. Most borrowers don’t have the money to pay off the loan in two weeks and resort to a rollover, which results in additional fees and a higher balance. It may seem never ending, but don’t lose hope. There are strategies to break free from this cycle and repay your loans.
Your repayment options will largely depend on your budget and overall financial situation. You can decide to work on your own or enlist the help of credit counselor to help you determine the best course of action.
In your current situation, you must prioritize both repaying the loans and getting current on your household bills. You can start by focusing on reducing your budget to free up additional funds every month. Be as thorough as possible and try to reduce as many expenses as possible.
Consider downgrading your cable services, switching insurance providers, selling your car for a cheaper one, and temporarily cutting off some expenses. To get current on your household bills, reach out to your providers and explain your situation and inquire about new rates, discounts, payment plans or extensions. Many utility companies are more willing to help than you think.
Once you have an idea of where you stand financially, you can weigh in your options. You can ask your payday lenders for an extended payment plan. This type of plan allows debtors to repay their loans in a longer period of time without additional fees. Many payday lenders do not offer this type of repayment assistance, so if yours is one of them, you can turn to a personal loan. Local credit unions and small loan lenders are usually willing to work with consumers with less than stellar credit while still offering fair repayment conditions. Personal loans will typically have a lower interest rate and longer repayment period than your current payday loans. Just make sure you work with a reputable institution and that you understand and agree with the repayment terms, fees and interest rates. But most importantly, you have to be sure you can afford the monthly payments.
Even if you decide to tackle this yourself, I still recommend you talk to a credit counselor. NFCC-certified credit counselors work in nonprofit agencies all over the country and they can help you work on your budget, review your current financial situation and proactively help you find the right strategy to repay your payday loans. They can also work with you to get current on your household bills and connect you to local resources as necessary. You just have to know that you are not alone and that with the right strategy, you can break the cycle of payday loans and become debt free. Your personalized help is one phone call away.
Bruce McClary, Vice President of Communications
Bruce McClary is the Vice President of Communications for the National Foundation for Credit Counseling® (NFCC®). Based in Washington, D.C., he provides marketing and media relations support for the NFCC and its member agencies serving all 50 states and Puerto Rico. Bruce is considered a subject matter expert and interfaces with the national media, serving as a primary representative for the organization. He has been a featured financial expert for the nation’s top news outlets, including USA Today, MSNBC, NBC News, The New York Times, the Wall Street Journal, CNN, MarketWatch, Fox Business, and hundreds of local media outlets from coast to coast.