The car broke down. The refrigerator stopped working. Your son broke his teeth and your daughter broke a window. These are all common scenarios that impact millions of people worldwide. These are also instances when you wish you spent less on lattes and more on building an emergency fund.
Payday loans serve as a valuable tool when you are out of options to cover an unforeseen expense. However, if not managed responsibly, this loan can act as a noose around your neck. As long as you know the terms and conditions of the agreement, be extra cautious about your money, and borrow only what you need, a payday loan is nothing more than just a temporary financial product to help you out of a jam.
So, what now? Where do you turn to? For a lot of people, a payday loan is a reasonable solution for instant relief. Indeed, there are a lot of costs associated with this financial product, but with some planning and responsibility, a payday loan can be a lifesaver to keep your head above water.
You just need to concentrate on repaying your payday loan, which could be the tricky part.
Here are nine easy ways to pay off your payday loans:
1. Refinance Your Payday Loan
One of the best ways to pay off payday loans is to refinance it. Like other more conventional lenders, payday loan operators want to be repaid by borrowers. One of the reasons why these financial products come with high interest is that they are usually lending to high-risk borrowers – also, the company borrows short-term cash, which is expensive.
There will be many instances when customers are unable to meet their obligations. Instead of running away and waiting for the collection agency to give you a call, you can always contact the payday loan provider and refinance, whether it is interest or how the principal is being repaid.
Payday loan companies are willing to work with you as long as you work with them.
2. Ask for an Extended Payment Plan
Are you unable to repay your $750 payday loan within two to four weeks? You are not the only one.
Similar to requesting refinancing, you can always inquire about an extended payment plan. Most payday loan businesses will agree to this request and put forward a better payment plan that is tailored to your financial situation. Again, it is important to point out that they want to be repaid, so they will try everything they can to ensure they do.
3. Cut Back on Expenses During Payday Loan
From the moment you take out a payday loan to the time you pay back the amount, it is imperative to cut back on your expenses to ensure that you are not short by the due date.
Your day to day expenses might not seem like much, but they all add up. A $5 morning latte here, a $10 order of avocado on toast there, and a trip to the movies on a random evening – it all adds up.
Therefore, for the next two to four weeks, be sure to reduce your outlays and stay within your means.
4. Search for Payday Loan Assistance Services
Because payday loans are more ubiquitous than ever before, and a lot of consumers are trapped in a payday loan cycle, many assistance services have popped up. These are both for-profit and non-profit organisations that aim to help consumers who are stuck on a payday loan treadmill.
When you feel like you are drowning in payday loans, it is imperative to find ways to repay the loan and never have to worry about it again.
5. Borrow from Low-Interest Alternatives
If you have been a savvy user of credit markets, then you might be aware of low-interest alternatives. You may possess a line of credit with just 3.5 percent interest. You may have been offered a credit card with three months of zero percent interest. Whatever the case, if you can borrow from other credit products that come with little or no interest, you should use it to get rid of your payday loan.
6. Dip into Your Savings
You hate to do it, but it may just be better to utilise your savings to pay back the loan. Indeed, it hurts now, but it is better than paying 25 percent interest every month that eventually cripples your finances.
7. Start an Emergency Fund
Life can come at you pretty fast. One day, you are running your life like a well-oiled machine. The next day, there are multiple fires to put out, including a new refrigerator and expensive brake repairs. It is important to start an emergency fund so that you can cover these unexpected costs without having to turn to credit cards or payday loans or your savings.
8. Use a Line of Credit
Because money is so cheap right now due to historically low interest rates, you can apply for a line of credit with little interest. Some financial institutions are offering as little as three percent, which is incredible when you consider the more expensive alternatives.
In the end, if you have a $20,000 line of credit and you pay just $990 in a single year, that is pretty good.
9. Establish a Monthly Budget – and Stick to It
Finally, the dreaded b-word: Budget. Every financial expert says it is crucial to create a monthly budget and, most important of all, stick to it. Everyone utters the b-word because it is true. By maintaining a budget, you can ensure you know what is coming, what is going out, and what you can save (retirement, investments, emergency fund, etc.).