Options for payday loan debt relief
If you’re living paycheck to paycheck, unexpected expenses can be very difficult to manage. Many people, faced with an emergency expense and an empty bank account, resort to payday loans.
With a payday loan, you can get a short-term, unsecured loan to hold you over until your paycheck arrives. This can seem like a good solution, but too often payday loan providers charge very high fees and interest, making them difficult to pay off. If you take out too many of these, or can’t pay them off right away and keep carrying them over, the accumulation of excess fees can soon put you into even deeper debt than you would have been had you not taken out the loans in the first place.
Video: Common Sense Ways to Get Out of Debt
If you’ve fallen into payday loan debt, what can you do to get out from under it? There are several options, all with their pros and cons.
Debt consolidation
With debt consolidation, you can combine several debts into one. Ideally, the consolidated debt has lower payments and lower interest than the original debts. This can make your debts easier to manage, as well as slow the interest-related growth that can cause our bills to grow faster than we can whittle them down.
If you choose to consolidate your debts, though, be sure the interest actually is lower than what you’re currently paying, and look out for additional fees added to your monthly bill. Also, if you consolidate your debts using a low-interest balance transfer to a credit card, then close the accounts you’re consolidating, be sure the accounts are listed as “closed by request of the customer,” or closing these accounts could have an adverse effect on your credit rating.
Debt Settlement
Debt settlement involves negotiating with your creditors to pay a percentage of what you owe and consider the debt settled. Debt management companies will perform this service for you, but often they charge fees based on a percentage of what you owe, as well as monthly fees and setup charges. If you decide to work with a debt management company to arrange for debt settlement, be sure you know exactly what they intend to charge you for their services, or you could end up just replacing one debt with another.
Video: Understanding Debt Settlement/Negotiation
Negotiate With Your Creditors
Direct negotiation with your creditors can sometimes allow you to come to an equitable solution that fits your budget and keeps your creditors happy. While this approach can be intimidating, being straightforward and honest about your situation might be the best route to bringing your debt back under control.
How to Stop Collection Calls
Constant calls from debt collections agencies can disrupt your life and add to the stress you’re already under. But you don’t have to resort to changing your phone number or disconnecting your phone to avoid them.
The truth is, you can tell debt collectors not to call you at all. Telephone conversations with collections agencies aren’t necessarily in your best interests, as you have no permanent record of what was said. It’s advantageous to you to communicate with collectors in writing. Sending them an official letter to this effect can not only stop the harassing phone calls, it will ensure you have a record of everything the collections agency has said to you. However, by law, the collectors aren’t required to abide by your request.
They do, however, have to abide by the laws regarding phone contact from collectors. The Fair Debt Collection Practices Act (FDCPA) provides guidelines for when and how often collectors can call. If a collector is in violation of these guidelines, you can take legal action against them, such as filing a cease and desist to halt their illegal harassment.
List: Common Fees Charged by Payday Loan Companies
Payday loan fees—a flat fee charged to grant the loan. These fees can be as much as $25-$35 for each $100 borrowed. When compared to interest rates for a standard loan, these fees work out to be astronomically higher.
Bounced check fees—usually for a payday loan, you write a postdated check for the amount you wish to borrow. If the lender cashes the check, and it bounces, you could incur fees from both the lender and your bank.
Repeated loan fees—if you are unable to repay the loan at the end of the agreed-upon period, you’ll probably have to pay another loan fee to extend the loan. With a vicious circle of repeated loans and additional fees, you could start a downward spiral you won’t be able to get out of.