Picture this: you’re one of the millions of people who don’t have access to credit cards, the reason why you run to your payday lender. Howe...
Picture this: you’re one of the millions of people who don’t have access to credit cards, the reason why you run to your payday lender. However, you’re having troubles paying off the loan since your next pay stub is exactly enough for your expenses so you apply for a second loan to pay for the first loan.
Now, you discover yourself trapped in this spiral and in a mess with your lender. What to do now? You need not fret, there are ways to get out of the loan debt trap. Take note because here’s how:
1. Cut your expenses
It may seem impossible at first but you can do this part of the getting-out- of-debt project. If you used to go out to grab a lunch, now try to cook your own meal instead. Using your car to go to work? Hop in the train or bus to cut back your gas expenses.
You need to figure out every single ways, whether big or small of help, to save money to pay for your what you owe otherwise you’ll stay in the debt cycle for a longer time than you would imagine.
2. Budget your expenditures
Once you have projected the money you borrowed and owed to your lender, determine now your overall monthly expenses and your monthly income -- rent, mortgage, utilities, grocery, mobile data bills and other expenses you are to pay aside from your load debt. If you can find a way to raise or earn extra money (e.g. garage sale, extra jobs), that would be helpful.
3. Payment Plan
Calculate how much you owe to your lender -- your loan + establishment fee of standard/agreed percentage of the amount you borrowed, percentage interest charge per month, debit processing fee and other necessary fees and additional charges (e.g. extended/amended contract, outstanding balance, etc.).
Once you get an overview of how much you owe, you can now easily make a payment plan that works perfectly with your budget. You should know, you’re going to need a lot of sacrifices in this process such as skipping movies, dining in restaurants and etc. prioritize and maintain a record-keeping of your expenses wisely.
4. Reach out to your friends and family
Your friends and family are the ones who will always have your back no matter what circumstances. Instead of applying for another loan to repay your previous loan, think for a moment if you can borrow from the people who are close to. If they are willing to lend you a small amount of money to pay your debts with no interest, go for it if it’s your only option left.
Just remember to pay back what you owe. Make a written agreement to ensure both sides are on the same boat and understand the conditions agreed upon.
5. Contact your lender
If you think everything above works but isn’t enough still, try reaching out to your lender. It may be frightening, yes. But you’ll never know unless you try. Who know maybe your lender has a kind and understanding heart.
Many lenders provide great customer service and they often substantially reduce or waive fees if you contact them beforehand. Don’t hesitate to reach out to your lender. Remember, there’s no harm in trying.
6. Pay back your loan immediately
Now that you have saved enough money to pay back the money you borrowed, it’s time to repay it. Go straight to your lender and hand them the cash, the earlier the better. By doing so even before the amount due, you are able to save yourself from using it for another expense.
If you could also pay off above the minimum, that would help make the process of repaying quick. Whenever you have extra cash, don’t go straight to the mall to buy unnecessary stuff, pay what you owe immediately.
If you can, prevent yourself from borrowing any more loans and learn how to budget your income and expenses. Look for other possible alternatives before listing ‘payday loans’ as your final resort.
About Chie Suarez:
Chie Suarez has spent time figuring out ways on saving money and stepping away from her go-to retail stores. She then became a writer for Speedy Money which offers hassle-free payday loans services.