If you happen to find yourself in a sticky situation dealing with your finances and you turn to payday loans you ought to know your options. Knowing exactly how payday loans work and how to pay them off is very important. Many borrowers don’t understand how they work and end up in a serious hole, often times deeper than before they took the loans out. These loans are very short term with very high interest rates. If you truly need to use these instant payday loans with no other options left then do so with caution. Now its time for you to know exactly how you can pay off you loan or loans with diligence!
Since many payday loan users already have other lines of credit, one can begin looking at older debts to make room for the much shorter term loan you just took out. These loans are often due every week building interest along the way. Look at your whole financial picture you can plenty of ways to save and repay this debt.
High Interest First
Once you get a good picture of how much you owe and who you owe it to, you can begin prioritizing payments. First comes the debts with the highest interest rates. Since you’ve taken out a short term loan which probably is the highest interest rate debt you owe you’ll start there. These loans can have rates up to 400% when annualized! Even worse if the borrower doesn’t make payment the next week then they face fees for renewing the loan.
Credit Union Payday Alternative
Credit unions offer small loans called payday alternative loans or PALs. Using one of these loans to pay off the original loan can be a good idea. The terms instantly become longer, around 1 to 6 months compared to one 1 week. Credit unions often offer $200 to $1000 in loans.
Extend the Payment Plan
Its worth a shot to ask your payday lender if you can extend the repayment plan. This will break up the payments into smaller chunks and more time. You’ll have no more fees and smaller chunks spread out making it much easier to breath. To do this you’ll need to sign a new loan agreement, at this point make sure to read carefully and full understand the terms before signing.
Personal Loan Refinancing
If your credit score is 580 or above consider this strategy to pay off the original loan. Some online platforms such as Avant offer debt consolidation with a personal loan. This will also extend the term and lower interest rates. This makes meeting the usual monthly expenses easier and having more room to pay toward debt.
Overall payday loans should be avoided. If you find yourself with no other options try some of these to ease the payments and give our finances some slack. You never know when an emergency can happen so it might happen during your payment week causing you to miss it! You can quickly fall behind and end up in a pit of fees and interest. Get out of short term debt by replacing it with longer term loans.