You must have bought payday loans by getting highly amused with their short term benefits. And later on you may have realized that you totally neglected the long term debt problems, during the buying process, that come as a buy-one-get-one free offer with the payday loans.
Almost 9 out of 10 payday loans are revived which results in increasing interest rates. If you belong to a low-income family then it is already very difficult for you to make ends meet. Not to mention how these payday loans are just a dream for you to afford.
An interesting thing to know here is the fact that interest rates are different for each state depending on the particular economy and average income of people.
No matter how difficult it is to save yourself from the payday loan debt trap, it should not damage your financial condition in any way. If you are worried about how to pay off multiple payday loans then we have combined the most important techniques and strategies to help you pay off payday loans.
Table of Contents
- 1 I Can’t Pay My Payday Loans What Will Happen?
- 2 How to Pay off Multiple Payday Loans
- 3 Payday Loans Debt Consolidation
- 4 Bottom Line
I Can’t Pay My Payday Loans What Will Happen?
If you are stuck in the burden of payday loans and cannot see any way out then the first step is to stop panicking.
You should convince yourself that it was not your mistake to buy payday loans. The way these loans are advertised is deceiving for many. When you hear about the benefits of payday loans it appears as this is the gateway to to fund all your sudden one-off expenses.
But the bitter truth about payday loans is that most people use them to fulfill their basic daily needs like food, clothes, petrol, etc. While there are others who purchase payday loans to pay back other credit.
Majority of the people who have purchased payday loans often complain about the different kinds of problems that they face in their routine life due to these loans. These problems include higher payments in fees and interests as compared to the actual loan’s principal value.
But, why are payday loan borrowers facing these issues? The reason for the increasing number of issues is due to the inability of cash-strapped people to easily pay off payday loans on time.
Put An End to The Ongoing Borrowing Cycle
No matter how worried you are regarding how to pay off multiple payday loans, never fall into the trap of getting more loans to pay off overdue loans.
Most people fall into this trap. This results in burdening yourself with more debts causing even more stress than before.
Even if you have taken few loans already to pay off payday loans, it is now time to stop this cycle. The borrowing behavior is neither going to put an end to your problems nor your stress levels.
How to Pay off Multiple Payday Loans
Now that you know that you are not alone in this struggle to pay off your payday loans, let’s look at different solutions to help you get rid of existing debts without borrowing any extra loans.
Begin By Paying off Debts With Highest Interests
If you have many different forms of outstanding loans then you should pay the ones which have the highest interest rates.
What effect will it have on your payday loans? This will help you in reducing the total amount of the payday loans that you have to pay at the end.
You also have to find unique ways to secure your finances. These methods can be various like finding jobs to earn extra income or by asking for funds from friends and family.
Approach Your Lender For Help In Payment Plans
You can also contact your loan provider and request him for some extended payment plan. To avoid any bad circumstances, it is preferable to approach your loan provider before the final due date arrives.
Once he agrees to offer you a good deal to help you pay off payday loans easily, he will give you a new contract. This contract will most likely give you an option to split your balance over a longer period of different months depending upon what suits you the best. You should thoroughly read this contract to double check that it meets all your present and future needs.
Call off the Continuous Payment Authority (CPA)
Your payday loans fall under the category of non-priority debt. This means that you do not need to keep them as your first priority when you start paying back your monthly bills. So, you can pay high priority items first like rent, utilities, bills, mortgage, etc. Once all your payments are completed, then check if you have any spare money left. If yes, then pay off payday loans.
But what if you have given continuous payment authority to your lender but you would not have any spare money left after paying for high-priority items? This is the time that you need to take immediate action to stop your lender from taking your money.
Everytime a person applies for a loan, he has to give his credit card details to his lender to establish a CPA. This gives your lender a straight link to your money and they can avail their payment anytime they want. Almost all loan companies follow this method to take repayments.
But in the worst scenarios, let’s suppose that your account does not have enough money needed to pay repayments in full. Your lender will still keep trying again and again to get the money back. This results in bank charges.
So, to avoid this, you should just call your CPA off when your budget is tighter. Follow these simple steps to do so:
- Write a letter mentioning all your problems in detail
- Mail the letter to your bank
- Once the bank approves your case, it will cancel your CPA
- Share a copy of the letter with your lender as proof.
Payday Loans Debt Consolidation
One of the most tried and tested methods to pay off payday loans is debt consolidation. It can assist you in quickly recovering from your debts. One important thing to know is that debt colidations is often mixed with debt settlement. This completely changes the perspective of the actual word. While debt consolidation never damages your credit score, debt settlement almost always ruins it.
So, it is important to understand the difference between the two of these.
Debt Consolidation vs Debt Settlement
If you apply for a debt consolidation to pay off payday loans then you will receive a loan from the bank. You can use this loan to settle all your overdue loans completely.
You can easily get a debt consolidation loan at a lower interest rate over a longer repayment term. It also offers lower monthly payments due to a longer repayment period and lower interest rates. This way you can easily manage the repayments of your loan.
The new repayment status of all your overdue debts in your credit report will change to “paid in full” from the previous “to pay off” status. This will create a positive impact on your overall credit score and is also considered helpful in borrowing loans in future.
On the other hand, some business owners advertise debt settlement plans as debt consolidation. This wrong marketing creates confusion among borrowers.
In a debt settlement, you only have to give a single payment to the company that is offering this consolidation. The company then gives the amount out to all your lenders. These debt settlement companies also play a great role in lowering the amount of your debts by negotiating with your respective lenders.
So what is the difference?
The new repayment status of all your overdue debts in your credit report will change to “settles” from the previous “to pay off” status. This will create a negative impact on your overall credit score and will most likely create difficulties for you in borrowing loans in future.
Now that you know about how to pay off multiple payday loans as well as things to avoid if you have overdue debts, you can easily get away from payday loans.
Once you are out of the debt burden, we recommend you to make a list of all necessary steps to prevent yourself from getting back into any similar situation.
You can begin by generating an emergency fund for you. It is also important that you keep a check on your credit scores and make efforts to improve it. So the next time when you have to pay off payday loans you do not need to worry. You will have all the backup and necessary information available along with a good credit score to further help you.