If you're currently stuck with a payday loan that you can't seem to ever pay off, you aren't alone. According to the Consumer Financial Protection Bureau, more than 60% of borrowers are trapped in payday loan debt. Those trapped in payday loan debt often roll over the loan and end up paying more in fees than their initial loan amount.
Even if you find yourself in the midst of the payday loan
debt cycle, there are strategies to help you break the cycle and get out of payday
- Extended payment plans allow borrowers to pay back their loan in installments over a longer time period. Check with your payday lender to see if this type of arrangement is offered.
- Contact your state regulators if payday lenders refuse to work with you on an extended payment plan. State regulators may be able to negotiate a payment plan with your payday lender.
- File a formal complaint against the payday lender if it refuses to work with you on a payment plan. Complaints can be filed with your state regulator or with the Consumer Financial Protection Bureau.
- Find an alternate loan source to pay back your payday loan in full. This could be from a traditional lender like a credit union or bank or a family member.
- Seek credit counseling for help with strategies to better manage your payday loan debt. Counseling is offered from many nonprofit organizations – just make sure to do your research when finding a reputable organization.
- Look for payday loan debt assistance like a debt management plan (DMP) or a debt settlement program. A DMP is a debt-relief option that will work with your creditors to come up with a monthly payment plan. You will deposit your money into an account that a debt management company uses to pay your bills. A for-profit company can negotiate a debt settlement program to pay a lump sum (or settlement) to pay off your debt. The settlement is typically less than the full amount owed, and it will require that you make regular payments into the settlement until the full settlement amount is reached.
- Bankruptcy is sometimes the only way to get out of serious debt, but it will come with consequences like a large blemish on your credit report for many years.
Getting out of payday loan debt will help you get your finances on track. While it will require time and effort, breaking free from the payday loan debt cycle will be worth it to build ongoing financial security for your future.
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