Escaping Payday Loan Debt: Simple Ways to Financial Freedom

Learn how to get out of payday loan debt

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Payday loans can cause massive financial trouble instead of offering relief. They provide instant cash within 24 hours of applying for a loan. But you should exercise great caution when considering a payday loan.

A payday loan is a short-term loan. You need to pay it back within 15 to 30 days of taking it out or the date of your next paycheck. People often roll the balance over to the next month. When they do, they have to pay additional interest on the loan.

When the high interest rates of payday loans suffocate you, there is no other option than obtaining another payday loan. This debt cycle could create a very stressful situation for you. With too many lenders, missing a single payment could drive you to the point of madness. Under such a traumatic situation, you need a plan to deal with the loans.

Should you consolidate your payday loan debt?

The practice of taking payday loans is very common in many parts of the world, including the United States. This is also known as a paycheck advance or cash advance. Since this is a very quick and instant way to access credit, the rate of interest associated with this kind of loan is quite high. 

Working on payday loan debt consolidation 

However, through payday loan debt consolidation, you can pay off your high-interest payday loans with relative ease. The short-term payday loan consolidation sometimes seems very large because of the regular default on making the repayment on the due date. 

Since the target customers of such loans are the lower class and the middle-class people, the small amount of loan accumulates into a very large amount because of steep interest rates and penalty charges.   

Thereafter, the lenders refer the case to a collection agency. The collection agency calls you several times so that you pay back the amount. The collection agency also ends up in its initiatives as you even pass on the harassing collection calls. Finally, consolidate your payday loan and come up with a realistic solution for you. 

Implications of Payday Loan Consolidation

In many cases, you avail of several payday loans but fail to repay those loans in time. Then, a company that is offering you payday loan consolidation services can consolidate your payday loan. They negotiate with your lenders and decide upon some realistic consolidated repayment plan for you. In this realistic consolidation plan, you are supposed to pay less total payment with a relatively low rate of interest. One important benefit associated with payday loan debt consolidation is that you need not have to deal with the collection agency or your creditors.

How to manage your finances to repay your payday loan debt

Scan your budget

Your very first step towards eliminating debt is to alter your spending habits. If you don’t have a budget, prepare one. Once you reduce expenses, you’ll free up money to pay back the loans. Give up unnecessary spending habits like having your morning coffee at Starbucks. It will help you quickly pay off your loans.

Initiate a step-down plan

If you are paying off an existing payday loan with a new one, stepping down might be the answer to your monetary problems. Make your payments on the current loan and take out a small loan to cover only necessary expenditures. For instance, if you have borrowed $300 every payday, bring the amount down to $200.

Consolidate your payday loans

If you are unable to manage payday loans, then the payday loan consolidation option can help you. A low-interest consolidation loan will help repay all your debts by combining them. Instead of multiple debts, you’ll have one loan to manage. With the extra savings, you can focus on making on-time monthly payments.

Enroll in a debt consolidation program

Payday loan consolidation becomes easier when you enroll in a consolidation program. You need to make a single monthly payment, no matter how many lenders you have. It lowers your monthly costs and helps you eliminate your payday loan debt faster.

Settle your payday loans

If you have massive payday loan debt and can’t repay it, then you can settle your loan. It is possible to pay your debts on your own. However, you may find negotiating a debt settlement to be overwhelming. By seeking professional debt relief help, an advocate will make sure your best interest is in mind and negotiate the best deal possible. Leading a frugal life can help you manage the debt settlement process.

File bankruptcy

Payday loan sharks charge high interest on loans. Many people default on their payments as they accrue interest on the principal balance. This makes it unaffordable to pay off the loan. Filing for bankruptcy can offer you relief.

Your state law determines whether you are eligible to discharge payday loan debt by filing for bankruptcy. Payday loan laws play an essential role when you file bankruptcy to eliminate your financial woes. By hiring an attorney experienced in bankruptcy law, you will get a full understanding of the filing process. They will inform you of your rights and guide you along the way.

Tips to avoid falling into payday loan debt in the future

When you take out a payday loan, it’s important for you to understand that it is costly. So, avoid applying for a payday loan as much as possible. Here are a few tips to help you avoid falling into the vicious cycle of payday loan debt.

  • Consider complete payment

Lenders prefer borrowers to make their payday loan payments in full. If you have a well-planned budget and can afford it, you should pay the entire loan. This is, without a doubt, the best way to eliminate your debt. When you make your payments in full, you don’t need to worry about incurring any extra debt. Some states don’t allow you to take out a new payday loan unless you repay the original one first. Once you have made the entire payment, you can pay attention to your other financial matters.

  • Go for the installment plan

If you can’t make your entire loan payments, an installment plan might prove very helpful. Since lenders prefer total payments, they don’t publicize that they extend installment plans. But, if you need help with loan payments, you might ask your creditor about paying off your loan in installments.

  • Avoid rollovers

Avoid rollovers as much as possible. Each time you renew your loan, you are required to pay a new service fee. This causes an instant trap in payday loan debt when borrowers rely on rollovers. This also results in a significant rise in the interest rate, as well. A couple of rollovers might give you extra time to eliminate your total loans. However, it is better to avoid rollovers since they will only lead you to a mounting amount of payday loan debt.


Remember, payday loans carry the highest interest rates. You should not be tempted by payday loans because they come with unwanted consequences. If you can, it’s better to lower your lifestyle expenses. But payday loans should be avoided at all costs. You can borrow money from your friends and family instead of taking out payday loans. Avoid payday loans in the future to ensure a debt-free financial life. It is to be kept in mind that a payday loan is a very short time and should be availed to meet some short-term yet urgent financial needs. The interest rate associated with this loan is quite high. So if you fail to pay it back on your next payday, you fall into a more financial burden. Even penalties are also imposed.

About the Author:
Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998 and currently works for the Oak View Law Group in California as a principal attorney.

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