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 Dear
Debt Adviser,
I'm deep in debt with payday loans. Is there a solution for paying off or getting payment plans on these types of loans or am I out of luck? I have a total of eight.
-- Tre
 Dear Tre,
Plugging a hole in a dam with chewing gum is a good analogy for using a payday loan to solve a financial problem. It is usually the only solution available on short notice for a problem that has been building for a long time. Solving long-term problems with quick fixes is rarely a bargain. In this case, it's not a bargain on many levels.
The fact you sought out a payday loan in the first place tells me you are not properly managing your finances. Also, that you have a total of eight loans tells me you are likely obtaining additional loans to pay the interest and fees on your existing loans.
As you have found out, the cycle is vicious and it's hard to break the cycle once it gets started without causing serious damage to your finances, credit and sometimes your relationships. The fees that are charged for a typical payday loan are the equivalent of paying more than 200 percent to 500 percent interest annually for the loan.
No one would sign up for a term
loan with those kinds of interest rates if there
was another choice, yet payday loan establishments
outnumber fast food chains in many cities across
the United States. New to the payday loan market
are nonprofit/lender partnerships.
These organizations provide loans at a lower interest rate than their for-profit counterparts, but the annual interest rate is still in the three digits. I was disappointed when I read about these nonprofit/lender partnerships and would rather have seen long-term lifestyle changes than a new flavor of payday loan chewing gum!
To answer your question, yes, you
can receive help to get out of the payday loan
cycle. Contact a reputable credit counseling agency
in your area and make an appointment to speak
with a credit counselor. You can find one by calling
(866) 703-8787 or visiting www.aiccca.org.
A counselor can help negotiate with your
payday loan lenders and, more importantly, can
help you put together a plan you can live with
to help avoid financial problems in the future.
I'd like to leave my readers with
a caution and of course some fabulous advice.
Rather than buying into the advertising that payday
loan establishments tout, "Get a loan to
tide you over until your next payday," stop
and think before you act.
Look at things realistically. If you don't have the money now, for whatever it is that you decide you need a payday loan to cover, what makes you think that when you get your next paycheck you'll have enough money to cover all your expenses, the payday loan and the odd emergency (engine problem, traffic ticket, pet or kid sickness, etc.) that always seems to pop up when you are most vulnerable? Trust me, based on 17 years of having people come through my door, you won't.
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Better than payday loan alternatives and actions: |
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Short-term personal loan from a credit union or bank. |
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Work on your credit in advance. |
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Credit card -- even with a default rate of 30 percent or more, you will come out ahead in terms of interest and fees.
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Pay your bills on time and keep balances below 50 percent of your max. |
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Skip a payment on any of your other bills except your car, rent or mortgage. |
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Medical and utilities can be the most understanding if you tell them in advance. |
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Borrow from a friend or relative -- better yet, trade a service for the money. |
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Make sure you've paid back what you owed from before. |
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Save for emergencies. This is the best way
to secure your financial future. Even
if you save
only a dollar or two a week, it will
add up and become a habit. |
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Good luck!
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