Payday loans can be a quick solution for temporary financial troubles, but if not managed properly, they can quickly become trouble and put you in a debt cycle which can become difficult to escape.
If you find yourself trapped in payday loan debt, there are many effective strategies to help you come out of this payday loan nightmare.
In this article, we will talk about the 13 best ways to get out of payday loans and break free from the burden of debt.
Key Takeaways:
- A payday loan debt can be challenging to escape, but there are effective strategies to regain control of your finances.
- Prioritize repayment by starting with the lowest balance payday loan. Consider consolidation or low-interest alternatives.
- Talk to your lender and try to negotiate payment plans. Consider making extra payments whenever possible.
- Develop good financial habits, such as budgeting, building an emergency fund, and avoiding unnecessary spending.
- Seek professional advice like debt counselling. Choose bankruptcy as a last resort.
Table of Contents
1. Pay the lowest balance payday loan first
If you have multiple payday loans, paying off the lowest balance loan first can be a strategic approach to tackle your debt. By prioritising and repaying your loans with the lowest balance first, you can experience a sense of accomplishment and motivation as you’ll start eliminating one loan at a time. This method is known as the “snowball method“.
As you pay off your smallest loan, you free up additional funds that can be redirected towards tackling the next loan. By using this approach, you can gradually gain momentum and build confidence in your ability to pay off your payday loan debt.
Remember, consistency and discipline are key to successfully implementing this strategy.
2. Look for payday loan consolidation
Payday loan consolidation involves combining all your payday loans into a single loan which will have low interest rate and more manageable terms. This approach can help you simplify your repayment process and save money on interest.
Debt consolidation loans can provide you relief from the burden of juggling multiple loans, allowing you to regain control over your finances and work towards becoming debt-free. Keep in mind to research and choose a trustworthy consolidation loan for the best result.
3. Try getting a low-interest payday loan alternative
Instead of relying solely on payday loans, you can explore a low-interest payday alternative loan. The alternative can provide you with the funds you need at a lower interest rate.
Look for options such as quick loans, same day loans, or personal loans from traditional banks or credit unions. Additionally, instead of going to payday lenders, you can try asking your friends or family members for help.
By trying these alternatives, you can reduce the overall cost of borrowing and make your repayments more manageable.
4. Request a payment plan from your lender
If you are struggling to repay your payday loan, you can request a payment plan from your lender. Many lenders are willing to work with payday loan borrowers who are facing financial difficulties. Contact your lender and explain your situation honestly.
A payment plan can help you manage your finances, giving you time to get back on track. Remember to talk to your lender promptly and provide all necessary documentation they may require.
Working together with your lender can help you find a beneficial solution and prevent further financial stress.
5. Pay extra on your payday loan debt whenever possible
Paying extra on your loan debt whenever possible can make a significant difference in your repayments. By allocating additional funds towards your loans, you can reduce the loan amount and the overall interest. This can help you pay off your loans faster and save money each month.
Consider cutting back on unnecessary expenses or finding ways to increase your income to get extra cash for loan repayments. Every little bit count, so even small additional payments can make a positive impact on your debt.
6. Do not borrow more payday loans
One important step in getting out of your existing payday loan debt is to avoid borrowing multiple payday loans. It’s important to understand that taking on additional loans only puts more pressure on your financial situation. Instead, focus on finding alternative solutions.
Explore options like a personal loan, budgeting, seeking financial advice, and increasing your income through part-time work or freelancing.
7. Create a budget and stick to it
Creating a budget and sticking to it is a very important step when it comes to managing your finances and getting out of a debt.
Start by checking your bank account statement, income, and expenses, and allocate funds for important things like rent, housing, utilities, and food. Prioritise your debt repayment. Don’t spend on unnecessary things.
Tracking your expenses and reviewing your budget regularly will help you stay on track and identify areas where you can save money and achieve your financial goals.
8. Build an emergency fund
Building an emergency fund is a crucial aspect of financial stability and getting out of payday loan debt. An emergency fund acts as a safety net, providing you with financial security in case of unexpected expenses or emergencies.
Start by setting aside a small amount of money from your income on a regular basis. Over time, this fund will grow, and you’ll have a safety net to rely on instead of depending on loans in times of crisis.
Make an aim to save 3 to 6 months’ worth of living expenses so that you can be prepared for any unexpected expenses and circumstances.
9. Stop spending on things you don’t need
To effectively manage your finances and get out of debt, it’s essential to stop spending on unnecessary items. Check your spending habits by reviewing your outgoings over the last 3 months and identify areas where you can cut back.
Differentiate between wants and needs, and focus on things which you really need. Avoid impulse purchases and be mindful of your spending decisions. Consider creating a list before shopping and sticking to it to avoid unnecessary expenses.
By stopping unnecessary spending, you can allocate more funds towards debt repayment and improve your financial condition.
10. Take financial help from friends and family members
In times of financial need, you can ask your friends and family members, if they can provide you some financial help. It’s important to have open and honest talk with your loved ones about your financial situation.
Explain your circumstances and discuss the possibility of receiving financial help or a loan from them. Remember, borrowing from friends and family should be considered as a temporary solution, and not a long term plan.
Read our detailed guide about lending money to friends and family – tips to remember.
11. Work extra or freelance for extra cash
To repay your payday loan debt fast, you can either consider taking up on some additional work or freelancing opportunities. Explore part-time jobs, gig economy platforms, or freelance projects that align with your skills and interests.
By dedicating your spare time to generate some extra income, you can increase your earnings and allocate the extra funds towards paying off your loans faster.
12. Look for debt counselling advice
A debt counsellor can provide you with expert guidance, helping you in understanding your options, creating a realistic repayment plan, and negotiating with lenders on your behalf. They can also provide valuable insights on budgeting, financial management, and debt consolidation strategies.
13. Consider bankruptcy (If nothing works)
Consider bankruptcy as a last resort if none of the above mentioned options works for you. Bankruptcy can provide relief from a loan, but it should be used cautiously. It can have a long-lasting effect on your credit, so it’s important to fully understand the consequences before proceeding.
Here is our detailed guide on what happens when you declare bankruptcy in the UK. Do give it a read.
How to Get Out of Payday Loans Debt Legally in the UK?
Getting out of payday loan debt legally in the UK requires a strategic approach. You can consider options such as repayment plans, debt consolidation, seeking financial advice, and negotiating with lenders.
It’s important to understand your rights and obligations as a borrower, and work towards a sustainable repayment plan.
In the UK, all loan companies need to be regulated by the Financial Conduct Authority (FCA). You can reach out to the FCA for guidance and even submit a complaint if you believe that your lender payday lender has acted unfairly or irresponsibly.
The FCA can intervene and help resolve disputes, ensuring that lenders adhere to the regulations in place.
What to learn from a payday loan mistake?
Learning from a payday loan mistake is important for your future financial well-being. Understand the consequences of payday loans, like high interest rates and short repayment periods. See the reasons why you took a payday loan and explore alternative financial strategies.
Focus on building an emergency fund and improving your budgeting skills to avoid similar mistakes in the future.
Using the experience as a valuable lesson, make informed financial decisions and don’t fall for a payday loan trap again in future.
What to do to avoid taking payday loans in the future?
To avoid taking a payday debt in future, establish good financial habits and employ the following practices:
- Build an emergency fund to cover unexpected expenses.
- Create a budget and track your income and expenses.
- Prioritize saving and reduce unnecessary spending.
- Explore alternative lending options which have better terms.
- Seek professional financial advice when needed.
- Improve your financial literacy through educational resources.
Final words
Escaping the cycle of a payday loan debt requires determination, discipline, and strategic planning. By following the above, you can regain the control of your financial situation. Remember to seek professional advice when needed and remain committed to your repayment plan.
By taking necessary steps and making informed financial decisions, you can have a brighter financial future.
FAQs
Do payday loans get written off?
Payday loans can potentially be written off, but it depends on the circumstances and the country’s legal regulations. In some cases, if the debt remains unpaid for an extended period, it may be considered as bad debt. However, it’s important to consult with a legal professional to understand the specific laws and regulations governing payday loans in your jurisdiction.
Can I refuse to pay a payday loan?
No, you cannot refuse to pay a payday loan. It is a legal obligation, and non-payment can result in consequences such as additional fees, and damage to your credit score.
Can payday loans send bailiffs?
Yes, if you fail to repay your payday loan, the payday loan lenders can seek legal action and involve bailiffs to collect the debt. However, it typically involves going through a legal process and the specific procedures vary depending on your jurisdiction.
How do people get trapped in payday loans?
People can get trapped in payday loans due to various reasons, like financial emergencies, limited access to traditional credit, lack of financial literacy, and the convenience with which a payday loan is available. Some borrowers may also fall into the trap of taking more than one payday loan debts or rolling over their loans, incurring additional fees and interest charges.
How can I clear my payday loans fast?
You can clear your payday loans fast by paying the lowest balance loan first, going for loan consolidation options, looking for low-interest debts, and budgeting wisely to allocate extra funds towards debt repayment.
Disclaimer: The information given above is provided for information purpose only. This is not financial advice.
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