If you needed a payday loan but couldn’t pay it back on time, you might have decided to take out another “just to get by,” which most likely led to an additional loan with higher fees. This would probably be followed by another, and then another, and before you knew it, the debt started to mount.
If this describes you, there is still hope. You can break the cycle of payday loans and avoid the high cost of debt. All you need is the appropriate approach and proper planning.
Why do the majority of people obtain multiple payday loans?
Due to the high fees and short repayment terms of payday loans, the majority of people take out multiple ones. The majority of borrowers actually end up paying more in fees than they gain from payday loans.
It’s simple to understand why: Payday loans frequently require a two-week repayment period. Borrowers are given little time to secure the necessary funds for repayment. Payday loans keep borrowers in a cycle of debt in this way.
The significance of repaying payday loans
According to a study, approximately 2 million Canadians utilize payday loans annually, and 50% of them have obtained multiple loans in the previous three years. According to the same study, many consumers were unaware of how payday loans functioned and how expensive they might be, with interest rates that could go as high as 650% depending on the province in which you reside. Take a look at the following scenario:
- You have to spend $300—money you don’t have—to take your pet to the vet. So you apply for a two-week, $300 payday loan.
- Over the course of two weeks, you’ll pay $45 in interest charges, or $15 for every $100 borrowed, for a total annual interest rate of 390%! You are now due $345.
- But on top of this new $345 debt, you still need to pay for all of your regular, daily expenses.
- Can’t afford to pay? You will be charged a fee. At this point, you owe nearly $400.
What happens next?
- The total amount owed, including fees, will continue to accrue interest.
- In order to get money from you, the payday lender will start contacting you. If you ignore them, they can try various approaches to get in touch with you, like getting in touch with your employer.
- A collection agency may purchase the loan from the payday lender, which would result in a negative entry on your credit record and a consequent decline in your credit score.
- You can be the target of legal action from the payday lender or collection agency.
- Your income or property could be seized by the payday lender or collection agency.
This doesn’t sound like much fun at all. So, here’s how you can finally pay off those annoying payday loans:
1. Inquire about an extended payment plan
First, try contacting the source for help paying off your payday loans. You have more time to pay off your debt with the help of an extended payment plan (EPP) from your payday lender. An EPP typically offers four additional pay periods to repay the loan without accruing additional fees or interest.
2. Debt consolidation program
A Debt Consolidation Program (DCP) can be another choice if you have payday loans or other types of unsecured debt, such as credit card debt, personal loans and line of credit. A DCP entails making one monthly payment for all of your unsecured debt, stopping all interest by working with a debt solutions company like EmpireOne Credit Solutions. A debt expert will speak with you and see what solution would best fit your current situation, so you can feel debt free in no time.
3. Request a cash advance from your employer
Some employers are ready to advance wages to their workers, especially if you have been with the company for a while and are dependable. Just make sure you have a strategy in place to pay for essential costs during the time your paycheck will be smaller than usual to avoid falling back into the payday loan trap.
4. Get a side business.
Based on your time and commitments to your family, a side business or part-time job will enable you to pay off your debt more quickly and with less interest. Simple jobs like bagging groceries on the weekends or strolling dogs are possibilities. You could even try your hand at the gig economy by driving an Uber or promoting your handyman skills on websites like AskforTask or Jiffy.
Speak to a debt expert at EmpireOne Credit
Contact us for a free consultation if you’re drowning in payday loans or other types of unsecured debt and would like some professional advice on how to deal with them. We provide courteous debt counselling, for all unsecured debt, including payday loans. We can go over your alternatives with you and go for the best option. Book a free consultation with us today to get rid of your overwhelming debt. You deserve to smile once again!
Debt free … Feels good!