These debt options will help you avoid the high-interest payday loan trap
Every year, over twelve million Americans take out payday loans, which last until the following payday. According to Consumer Finance Protection Bureau statistics, approximately 80% of payday loans are rolled over within 14 days, with the majority of these loans being for amounts similar to or greater than the original. The interest rates on these loans are typically exorbitant, locking borrowers in a cycle of debt and poverty. You may face serious financial penalties if you do not repay the loan.
There are alternatives to avoid shady lending practices and take back control of your finances.
Alternatives to payday loans
Before you take the payday loan, you must exhaust all options, including asking for the advance of your company, borrowing funds from relatives or friends, or even selling items that are not used. Be aware that there are other options for borrowing with low-interest rates and charges which may be available to you.
Here are a few possible loan options:
Personal loans, such as those offered by your bank, credit union, or internet lenders, are normally repayable over a two- to three-year period. Interest rates are decided by your credit history, which must be at least 36 months old. The amount of a personal loan that may be obtained varies, but it can range from $800 to $30,000. It is feasible to utilize a personal loan to establish credit and also to consolidate other loans with higher interest rates, such as credit cards if handled carefully. Personal loans, on the other hand, might exacerbate existing financial difficulties. They are, nevertheless, preferable to payday loans, which may cost up to 400 percent.
Payday loans available from credit unions to customers generally offer rates of interest that are lower than 20% and provide the total loan amount generally under $800.
If you do have any left credit line it’s best to utilize the current credit account. Even with the possibility of a rate of interest upwards of 36%, this is preferred to a payday loan.
How do you handle an existing payday loan?
If you’re currently dependent on a payday loan be aware of the alternatives that are available to you.
An extended-payment plan is offered in some states, allowing you to make lesser monthly installments. However, this type of plan is not accessible in every state, so check with your lender to see whether this is a choice in your area. Furthermore, the extended repayment plan is often only available for a year, so don’t expect to roll over debts or continue to benefit from the extended repayment plan.
If you do have access to one of the loan options listed above, you may be able to combine your payday loan with one of the following: a credit-debit card credit union loan, a personal loan for a lower interest rate.
Third Try to reach a direct resolution with your lender. in the event that this isn’t possible then you may submit a complaint to either the regulator of your state or with the Consumer Financial Protection Bureau. While lenders are not required to address these complaints states’ regulators, the state regulators or CFPB could be able to give you valuable details to help you negotiate your situation.
Being a part of a debt management plan is also an option. They are credit counseling firms that work with your lenders to negotiate reduced interest rates, lowering the amount of interest you must pay. In exchange, you pay a monthly installment to the credit counseling service, which they use to pay down your credit card obligations. However, a debt management plan may require you to cease using credit cards for the duration of the program. This might have a negative influence on your credit. In addition to the expenses for putting up the plan, they may levy a monthly fee ranging from $25 to $75. Even only to understand the possibilities available, the initial evaluation appointment is frequently free and well worth your time.
In the same way, declaring bankruptcy will eliminate most debt (with notable exceptions like student loans) However, it could result in long-term effects on your credit. While bankruptcy is not always attractive, it could provide an end to those who are stuck in a cycle of high-interest debts and a worsening range of financial options.