Payday lenders prey on borrowers with bad credit who, in dire need of money, find it difficult to trap them in a cycle of high-interest loans.
The vast majority (93%) of borrowers regret taking out their payday loans, according to a new survey from datehammer, Only 1% of respondents said their financial situation improved after borrowing a payday loan, while 84% said they were in worse shape.
Payday loans give consumers the opportunity to borrow small, short-term cash loans without a credit check. But the typical repayment period is only two weeks, which causes 4 out of 5 borrowers to borrow a new payday loan to pay off their current loan. Consumer Financial Protection Bureau (CFPB) reported.
It is possible to get out of payday loan debt without renewing your loan and incurring additional fees. Keep reading to learn how to break the cycle of payday loan borrowing, like consolidating debt with a personal loan. You can do this Compare Rates on Debt Consolidation Loans Free on Reliable without affecting your credit score.
3 ways to get out of a payday loan
The average cost of a payday loan equates to an annual percentage rate (APR) of about 400% — in other words, borrowers who keep their payday loans current can pay off the amount they originally borrowed over the course of a year. 4x the payment of Rs.
Payday lenders might make you think that paying off your loan is the only way to pay off your loan, but it isn’t. Here are some alternative ways to break the payday loan cycle:
Read about each repayment plan in the sections below.
1. Debt Consolidation Loan
Personal loans are one-time loans that are typically used to consolidate more high-interest debt, such as payday loan debt. They come with fixed interest rates and repayment terms, which means your monthly payments will be the same when you pay off your loan.
These debt consolidation loans are generally unsecured, which means that you do not have to hold assets as collateral. Because they are unsecured, lenders determine your interest rate and eligibility based on your credit score and debt-to-income ratio.
Well-qualified borrowers may qualify for lower rates on personal loans for debt consolidation. Personal loan rates are at an all-time low as per federal Reserve, an average of 9.39% in the third quarter of 2021.
Some credit unions also offer smaller payday alternative loans (PALs), which allow members to borrow up to $2,000 with an interest rate cap of 28%. However, these loans can be difficult to find because only a small fraction of credit unions offer PALs.
You can do this See if You Qualify for a Debt Consolidation Loan Reliable with an easy credit enquiry, which will not affect your credit score. Using the personal loan calculator Estimate your monthly payments to see if this option can help you get out of payday loan debt.
2. Extended Payment Plans
An Extended Payment Plan (EPP) lets payday loan borrowers repay their loan for a longer period of time than the typical two-week repayment period. Many states require payday lenders to offer an EPP, so you’ll need to research your state’s laws to see if you’re eligible.
Some payday lenders may offer an EPP, even if they are required to do so by law. related lender Community Financial Services Association of America (CFSA) requires borrowers to offer an EPP, but other financial institutions may not provide this option.
3. Credit Counseling
Nonprofit credit counseling agencies offer free or low-cost services for borrowers who are struggling to manage their debt. One of these services includes enrolling payday loan borrowers in a debt management plan (DMP).
Under a DMP, a credit counselor will help you create a budget and loan repayment schedule. Credit counselors can help you negotiate with payday lenders to lock in a lower interest rate or reduce the loan amount.
You can see the full list of certified nonprofit credit counselors here. Department of Justice Website. If you still have questions about Payday Loan Debt Relief, Learn more about debt consolidation by contacting Knowledgeable loan officers on reliable.
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