How To Rescue Yourself From Payday Loan Debt

Payday loans are an immediate way to get cash, irrespective of your credit score. These loans are typically small amounts that need to be paid back within the short term. According to estimates, nearly 12 million Americans are already using payday credit at least once a year. Payday loans have higher interest rates associated, making them a riskier proposition than other credit options. 

In this article we will discover how to find a way out of the debt trap many borrowers find themselves in by not fully understanding the implications of applying for payday credit.

First Step: Understanding How It Works

Before we start, it is important to understand the difference between payday loans and installment loans. Personal loans are funds that are repaid in a number of equal installments, spread over an agreed period of time, whether secured or unsecured. On the other hand, payday loans are small, short-term, unsecured credit that typically comes with high interest rates. 

If you choose the wrong type of loan, you could face multiple challenges in making repayments. For example, if you do opt for a payday loan and do not receive the cash you were expecting to use to pay back the amount, you may find yourself stuck in a major debt trap. 

If you have any doubts about having enough cash to pay back the sum in the short term, then it is advisable that you opt for a different type of credit agreement with a longer repayment term. Payday installment loans are a potential option as they provide instant cash like payday loans, but offer longer installment based repayment terms.

Second Step: Look For Alternatives

If you are already stuck with a high interest payday loan that you can not pay back, then the only way to redeem yourself might be to opt for a new loan to pay it off. However, you need to be extremely careful while taking this next loan. Here we look at some alternative credit options:

Personal Loans

The biggest benefit of most personal loans is that they allow you to pay back the borrowed amount over a longer period of time. You could take out a personal loan to pay off your payday burden and then look for ways to improve your income over the longer term. In addition, interest rates tend to be comparatively lower and you could negotiate for initially lower monthly payment, allowing you some breathing space. 

Debt Consolidation Loans

Another alternative is to opt for a debt consolidation loan. These agreements essentially allow you to take out fresh credit to cover your payday debt as well as any other obligations. The primary benefit of this alternative is that it allows you to lower your interest obligations by paying off all your outstanding debt, then spreading out payments over a longer period than your previous debts were allowing you.

These types of credit agreements are useful for managing all your existing debt and not just payday loans. This option is ideal if you are already battling to pay off multiple obligations that are affecting your short term cash balances. Consolidating your debt in one place allows you to plan your finances and take control of your financial future.

OppLoans

You could also explore Opploans, which is a popular online lender in the US. This lender does not look at your credit score while lending you the money. This feature ensures that you will be able to raise money even if your finances are not in great shape. The lender processes applications in a quick and efficient manner, with such loans typically disbursed within a matter of hours. However, these attractive terms do not come without a price. While not as high or as aggressive as payday options, Opploans do come with higher interest rates than lenders who use credit scores to manage their lending risks.

Conclusion

Payday loans can be hard to pay off. They typically have shorter payback periods and high interest rates. Nevertheless, even if you are stuck with a payday obligation that you are struggling to repay, there are options to get yourself back to financial health. You should explore all options and talk to different lenders, including personal and installment loan providers. Similarly, you could also explore debt consolidation credit. In any case, you must choose the option that is the most suited to your specific situation to maximize your chances of escaping a debt loop.