When you need a small amount of money for a short period, payday loans can be valid options. The problem borrowers run into is that short terms and high fees make these loans difficult to repay, forcing them to take out new loans each payday to cover the original amount. If you’re in this situation, it can feel like you’ll pay this loan’s high fees for the rest of your life, but there are simple steps you can take break the cycle for good.
Consult your budget
At this point, it doesn’t matter if you started using payday loans because of an expensive emergency or you weren’t managing your money in a responsible manner. Getting out of the payday loan cycle is your focus. Before you can do this, you must revisit your current spending habits.
Review your household budget and your bank statements to uncover areas of overspending. Even if you can only cut out $100 in expenses each month, that’s enough to make a dent in most payday loans and begin slashing the amount of fees you’ll pay from each paycheck. Maybe reviewing your spending means you’ll forgo eating out, cable or trips to the movies until you repay your payday loan debt, but the result is well worth the sacrifice.
Compare your loans
Depending on the expenses that led you to use payday loans, you might have multiple loans with various lenders if you were unable to get enough money from one. Fees for so many different high interest loans make it even more difficult to get out of debt, but it’s not impossible. Read all your contracts and find out which loan charges the highest fee per $100 borrowed. Make it your goal to repay that one first to save the most money.
Cut back on your borrowing
Just because your first payday loan was $500 with fees totaling $50 doesn’t mean you must borrow the full $500 each payday. In fact, some lenders will let you borrow money in $25 increments. Borrow as little money as you can afford at each check. For example, borrowing $400 instead $500 will cut your fees by $10, giving you $110 you don’t need to repay from your next check. Be diligent with your spending habits and chip away at your payday loans with every payment until your balance is gone.
No matter how you entered the cycle of payday loans, never forget that you can get out of this debt. As long as you make it a priority, you will succeed.
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