Payday loans are short-term loans that can be taken against your next month’s salary. It is easy to access payday loans. The lender will request for only your personal details and financial details such as your bank account details. Even people with bad credit scores are able to get payday loans without much stress. Unlike traditional loans, payday loans can be funded in less than 48 hours. Most of them are offered online and that means you can apply from anywhere and you will receive the funds without having to visit the lender’s office. The cash will be disbursed into your account when your application is approved. Since this loan is easily accessible, the rates are high.
Due to the convenience of accessing payday loans, many people rely on this loan to supplement their income when the need arises. Unfortunately, most people go back to payday loans over and over again. In the end, they are left with huge debt that they struggle to repay. If you also in this situation, you are not alone. The good thing is that you can settle your payday loans and be free from constant calls and messages from lenders.
Here is what you can do to clear your debt
- Check your debts
You should check your credit report to know the exact amount you owe. Knowing the amount you owe will help you to develop the payment plan to clear your debt. It will also help you to know the extent you damage caused. If you know the extent of damage, you can decide whether you can clear the debt yourself or get assistance from a professional.
- Stop Borrowing
This is one of the most important steps. You need to stop bleeding if you want to clear your debts. You should adjust your lifestyle until you no longer need to rely on payday loans to supplement your income. You should not be hard on yourself. You may be tempted to stop it all at once since you are determined but that may backfire. Allow yourself to get used to the idea gradually. You will need to stop visiting luxury restaurants until you have cleared your debts. You will also need to put an end to impulse buying. Purchase items you need only. It will even be helpful if you leave your credit cards at home so that you are not tempted to make purchases you have not planned for.
- Increase your income
There are several ways to make extra cash in your spare time. You can use your car for Uber. You can also walk pets or babysit. Sites like eBay allow you to sell items you no longer use. You can also start tutoring students in subjects you know very well. This opportunity is ideal for teachers. There are also several opportunities for creative writers and designers online. You can apply for freelance gigs and do them in your own time. You can also apply for virtual assistant roles. You can also earn more cash by working overtime at your workplace. Increasing your income will give you more disposable income to increase loan payments.
- Apply for an Extended Payment Plan
If you realize that your debt is too much and you cannot repay it in a single month, you can opt for an extended payment plan. This feature is not available in every state so you will need to confirm first. If your lender is a member of the Community Financial Services Association of America, then you are in luck. Members of this association allow their customers to apply for the extended payment plan. Applying for this plan means that you will get additional time to pay for your loan without additional fees or interest rates. To apply for this feature you will need to follow certain steps. You should apply on time. Your application should be submitted no later than the last business day before the loan is due. You will also need to sign a new contract with your lenders. If you took the loan from an online lender, you will need to contact them for further information on how to sign a new contract. If it is a lender at a physical location, you can always walk in to sign a new contract.
- Consolidate your debt
Consolidating your debt is one of the ideal methods of handling your situation if you struggling with several high interest loans. Payday loan rates can even run into triple digits and you will do yourself a lot of good by consolidating it. Loan consolidation does not get rid of your debt but it combines it into one. The interest on it will be smaller and you can save on interest rates. Usually, you can consolidate your debt by either getting a personal loan to clear all your high interest debts or transferring the balance onto a credit card. With the personal loan option, you can apply for credit from a Credit Union or financial institution that is flexible that can offer you credit for a moderate rate even if you have a bad credit score.
Before you consolidate your debt, make sure that you can save some cash on interest rates. You should also check to make sure that the cash you save on interest does not go into paying for fees. The idea behind consolidating your debt is that you can reduce your monthly payments since rates are lower. If you realize that you will not be saving much and your monthly payments will not be reduced significantly, there is no need to consolidate your debt. This is because debt consolidation prolongs the period you stay in debt.
- Debt Settlement
You can also opt for debt settlement. This service is offered by debt settlement companies also called debt relief companies. The debt relief company will contact your creditors and negotiate a reduction in your debt or a better payment plan for you. The company may try to negotiate for the creditors to accept a lower lump sum amount as payment for the amount owed. While the settlement company is negotiating on your behalf, you will be required to make payments into an account that will be under your control. The account will be administered by a third party. The settlement company charges a percentage of the amount you will save after the settlement.
Once the settlement company completes the negotiation, the debtor will know the amount he or she will pay as a lump sum. Although debt settlement is one of the popular methods of clearing payday loan debts, it has its shortfalls.You will incur more debts if the creditor does not agree to the negotiation. If this happens, you will be charged with several penalties for not missing payments. The debtor will also be charged fees even if only one creditor agrees to the debt settlement. One thing to be cautious of is scam debt settlement companies. These companies can worsen your situation. They will not even negotiate with the creditors but they will make you believe that they are doing it. They will also start charging fees. In the end, the creditors will accumulate several late fees for you to pay. You will lose more money. It may even damage your credit score further if creditors report missed payments to the credit reporting bureaus.
- File for Bankruptcy
This is a subject no one likes to visit but if it gets to a point where you have exploited all possibilities to no avail, you will need to file for bankruptcy. Do not wait for the problem to grow bigger. Individuals can either file for Chapter 7 or chapter 13 bankruptcy. Although the processes differ, there are some similarities. People who file for Chapter 7 bankruptcy are people with limited assets while Chapter 13 bankruptcy is great for people with a regular source of income.With Chapter 7 bankruptcy, the court will first assess your eligibility. You will need to submit the schedule of debts, income, binding lease, expenditure, assets, and liabilities. The court will conduct a means test to determine if you qualify. To qualify, your income should be less than the state median income. If you are eligible, you will need to sign up for credit counseling. The credit counseling must be offered by a government recognized credit counseling unit. You must also receive a 2-hour financial management course and you must submit the certifications you have received. After getting all your documents, you can proceed to file a petition.Once you file a petition, it starts an automatic stay on actions by creditors. This means that creditors can no longer demand payments. The will also not be able to garnish your wages or file a lawsuit against you. the filing fee is $335 but you can apply for it to be waived. The court will next appoint a trustee to be in charge of the entire process. He or she will be in charge of liquidating your assets and using them to pay off your debt. There is a list of assets that will be exempted during the execution process. Vehicles up to a certain value are exempted. Others include reasonable clothing, household appliances, jewelry up to a certain value, pension, a portion of wages that have been earned but are yet to be paid, and public assistance. Assets that will be liquidated include expensive musical instruments except when the debtor is a professional musician. Stocks, a family heirloom, accounts, stocks, bonds, cash, a second home, a second truck, and collections of stamps, and coins.The trustee will schedule a meeting between the creditors, the debtor, and the trustee. This meeting should take place within 40 days after the petition is filed. You will be put under an oath and the creditors and trustee will ask you questions. After the meeting, you will be presented a list and you will be required to satisfy the requirements on the list. this will include taking a financial management course. The trustee will also ask you to make any asset that is expected to be liquidated available if you any exists. The case will be closed after these have been done. In most cases, this takes four to six months.With Chapter 13, individuals will only be eligible if secured debts are less than $1,184,200 and the unsecured debts are less than $394,725. The individual should also not be dismissed from a bankruptcy case for failure to appear in court within the last 6 months. If the debtor qualifies despite all the requirements mentioned above, the debtor will file a petition at the court. He or she will also file a schedule of assets and liabilities; income and expenditure; statement of financial affairs, and a schedule of contracts and unexpired leases. You will need to receive credit counseling and file it at the courts. When you receive the credit counseling, the counselor may recommend that a debt payment plan is developed. You must file the debt payment plan as well. When you file at the court, you will be required to pay a $235 case filing fee and a $75 miscellaneous administrative fee.A trustee will be appointed for the case. Filing a petition automatically stays all collection actions against you. Between 21 and 50 days after filing the petition, the trustee will hold a meeting between the creditors, the debtor, and the trustee. The debtor will be put under an oath and then the creditors and trustee will ask questions. A plan will be submitted to the court for approval. The debtor is expected to make payments to the trustee who will then distribute them to the debtors.There are three types of claims; secured, unsecured, and priority claims. The priority claims include all the claims that have received special status from the bankruptcy court. This includes filing fees and taxes. The secured claims are debts that are secured by collateral and the unsecured claims are debts that are not backed by collateral.If the debtor wants to keep a property that has been used as collateral, he or she is expected to make payments that are at least equal to the value of the property. The debtor is also expected to make full payments for priority claims unless the creditor agrees to waive some of it. The debtor may not pay the full amount that is allocated for unsecured claims provided he or she is able to make payments for a projected disposable income for a period. Within 30 days after filing the petition, the debtor is expected to begin payments to the trustee. The debtor will be discharged after he or she has been cleared of all debts.
Alternatives for Payday Loan
After you have successfully settled your payday loan, you should try your best to avoid this problem in the future. Many people suggest that you explore other avenues for funds before you decide to go in for payday loans. you can consider the following first.
Family and Friends
You can go to your family and friends for loans if you need cash. The advantage that comes with this is that you will not pay the interest rate and there will be no processing fees. Although it is cheaper when you get loans from family and friends, it can sour your relationship if things do not go as expected. You should be cautious when you get a loan from them. You should be honest with the lender. Tell them exactly when you can pay the loan. It is not advisable to tell them lies with the hope of getting the loan. You should make sure you pay at the agreed period. If you are unable to get the cash at that time, inform the person and tell them the period you will be able to pay.
You can also opt for personal loans when you need cash. The repayment periods are longer and the rates are not as high as payday loans. Fortunately, there are lenders who offer fast personal loans. Most of them are offered online and you can still access a loan even if you have a bad credit score. Apart from alternative lenders, you can get loans from community banks and credit unions. These lenders also offer loans to people with poor credit scores and even people who do not have a credit history.
Although you can consider these alternative options, there is more you can do to keep yourself out of payday loan cycles. You can get an emergency account to help you deal with your emergencies. You will save up some cash in that account for unexpected circumstances. This means that you will not need to rely on payday loans for funding. You should also try as much as possible to stick to your budget at all times. Make sure your expenditure is not more than your income. You should also consider building your credit score since you can access low interest credit facilities if you have a low credit score. After clearing your debts, try as much as possible to repair your credit score. There are loan facilities with very low interest rates and there are only available for people with good credit scores.
George worked in the credit bureau for five years before switching careers to become a speaker on credit score improvement. He is passionate about helping people get ahead with improving their bad credit and teaches people all the tricks he knows about debt consolidation.