In today’s economy a lot of people are using high interest payday loans to help them in a financial fiasco or even to pay monthly bills. If things get tough would you be able to fight the ever-present ads on the web that allure you to “get a fast cash loan”? A lot of people do not realize the risks of cash advance payday loans until they have plummeted in debt and cannot find a way out.
What is a payday loan?
In layman’s terms it is a short-term loan where a person goes to a payday lender and writes a check for the amount the wish to borrow; this must include a fee and is typically for a two week period. The lender then cashes that check at the end of the two week period. After the two week payback period the borrower may lengthen the loan if they cannot pay it off in time because they are low in funds. When a loan is extended the loan accrues more fees and this is how people get into difficulty. They are exceptionally expensive because they charge a huger amount of interest and fees – which is why they are dangerous – typically with over 100% annual percentage rate. Payday loans are never a good way to manage or lend money.
Targets of payday lenders.
The most financially weak people fall victim to these types of loans. They are aimed at lower income people who have no way of borrowing money – other than a payday loan- when a crisis arises. Payday lenders are never in high-end neighbourhoods, but often shielded low-income areas. Customers who are in need of cash find it a tempting way out – just writing a check means you have cash now and don’t have to worry about paying it back until a later date – and it doesn’t involve a credit check!
What happens in a payday loan is a never-ending cycle of borrowing and paying until the person gets to a point where they can’t afford any more fees and interest charges that have been added. Financial experts say that people who have payday loans have a hard time paying them off. When this happens a borrower will call a credit counselling agency for help with paying it off. This is where credit ratings get ruined because they’ve become negligent on their loans repayments.
3 tips for paying off a cash advance payday loan
You cannot place a payday loan on a debt management plan and they seldom offer benefits or lower rates through credit counselling programs. But there could be beneficial ways to help a payday loan borrow who is in trouble. If you find yourself in this predicament then here are some options to think about:
Talk to the lender
Call the payday lender and try to discuss your problem with a manager. Ask to be put onto a hardship program allowing you lower rates and affordable payments. Payday lenders want to make the most out of each loan they allow, but they are keen to recover agreements with borrowers who are genuine about working out their payment difficulties.
Wait until your loan goes into collections
You could also wait until you loan goes to a collection agency. If you are past the due date of paying off your loan, you can expect your lender to try to persuade and intimidate you to pay, if you don’t your loan will be given to a collection agency. When this occurs, you may be able to start a debt management program providing you with an easier payment and predicted pay off time.
Pay your debts
Lastly you can get in touch with a debt settlement company and file for bankruptcy and deal with a bankruptcy attorney or debt professional.
A last few tips for cash advance payday loans
Try to avoid payday loans as much as you can. But, there are people who still use these loans irrespective of the consequences. If this is you, make sure you have tried all other options first. Always look at the benefits and risks of a cash advance or short term loan. If necessary make sure you get the better option –for your circumstances- that is worth the money you are paying out for a loan like this, if of course, you go ahead with a loan like this.
Try other loans from various other sources first. Try to save up a fund that you can use in an emergency in a high interest rate savings account, meaning you don’t have to rely on a credit card, bank or payday lender. This is overall the greatest option to ensure you don’t fall prey to payday lenders.