Payday Loans

According to Nitro by Sallie Mae, an estimated 80 percent of individuals owe money each month. Many resort to payday loan help since qualifying is easy, but this is a very risky option due to its high interest rate.

A lender will not do a credit check. The only requirements are verification of employment and income, as well as valid identification—which could make this type of loan enticing if you have bad credit.

Research suggests that payday loan debt relief is mostly used for recurring items like utility bills, medical expenses or car payments. Seeing as it isn’t typically used for emergencies suggests that this type of loan is the result of poor financial management.

This type of loan is characterized by its short payment term of a couple of weeks to a month. It is meant to cover immediate living expenses from one paycheck to the next, hence its name. Loans are typically between $500 – $1,000, and the intention is to repay it using funds from your upcoming paycheck.

If you are unable to pay within the due date, your debt will continue to accumulate at an alarming rate. For instance, let’s say you borrow at a 400% APR. For every dollar you get, you will have to repay four dollars. This is what differentiates a pay day loan from most others. While some people consider this as a last resort, it is essentially a debt trap. Any other debt relief option is better than this.

There is a long list of consequences. One of the biggest ones being that you will be forced to use up a good part of your next paycheck to reimburse the loan, which includes the entire sum with principal and interest. There are no gradual payments if you can’t cover it all at once. Since the average lump sum payment uses 36% of one’s paycheck, you have a good chance of failing to meet your regular expenses month after month.

Many state laws set a maximum amount for payday loan fees ranging from $10 to $30 for every $100 borrowed. But even with regulation, a typical two-week payday loan with a $15 per $100 fee equates to an annual percentage rate (APR) of nearly 400 percent.

If you fall short of covering your monthly expenses, you may very well need additional assistance with payday loan debt by borrowing even more money. In fact, 1 in 4 payday loans are renewed, which continues the cycle of debt at a drastically high interest rate.

Even worse, the lender has the right to collect by taking money out of your checking account. It gets really ugly if there isn’t enough money to cover the debt. You will get socked with a very big bank fee, and the lender won’t stop trying to get their money. They may even sell your debt to a debt collector who will hassle you unmercifully until you repay it.

Debt Consolidation Reduces The Number Of Creditors To One

If you are only able to cover the minimum on your credit card bills, you could take decades to pay the balances off. That’s where debt consolidation can come to the rescue.

This type of debt relief reduces the number of creditors you pay by rolling all your prior balances into a single new loan. You then use the loan money to pay off your current creditors and say good riddance to late fees and penalties.

In addition, you will only need to track one payment at a single interest rate every month. You could even save money with a lower interest rate – although it will be for a longer payment term.

However, debt consolidation in the form of a loan isn’t for everyone. If your outstanding debts are so high that you can barely keep up with the minimum payments, you may not qualify. That’s when debt settlement might be the better option.

Debt Settlement Reduces The Amount You Owe

If your debts have grown to the point where you feel desperate enough to seek a payday loan relief program, there is a better alternative called debt settlement. And you could qualify even if bad credit is standing between you and other loans.

This type of debt relief reduces the amount you owe. It is based on the premise that creditors may accept a lower amount rather than risk the chance of receiving nothing at all.
If you qualify, you and your Debt Coach will determine a monthly payment amount that fits your budget and comfort level. The funds will then be deposited into a special FDIC-insured savings account in your name. So, instead of covering many unaffordable large bills each month, you will pay just one.

Once you have enough money in your account, our debt experts will negotiate on your behalf to substantially reduce the amount you owe. Only after you approve the settlement will the creditor be paid. This will continue until your enrolled accounts are resolved. And you could settle your debts in as little as 24 to 48 months.

Your Debt Coach will also show you better ways to manage your finances, including budgeting, saving, and planning ahead. That way, you could put debt, and payday loans, in the rear-view mirror.

Looking over your shoulder every time you can’t pay a creditor must be exhausting. And payday loans can get you in way over your head.

Instead, you can work with a company that treats you like a person, not a number. With the right support, you can resolve your debt and get back to a less stressful life.