Borrowed responsibly, money received with a payday loan can be a huge help. The problem is that many take out the loan, spend money on other things, and when it’s time to payoff payday loans, there’s no money left. This leads to a cycle of renewing loans, with the amounts growing higher and higher each time.
Convert Payday Loans to Personal Loans
If you have an okay credit rating, your bank or credit union may be able to qualify you for a personal loan. The interest rate will be much, much lower than that you receive with a payday loan. Make monthly payments for a specific period of time and payoff payday loans for good.
While APRs for payday loans are often over 300 or even 400 percent, many personal loans have interest rates of less than 10 percent. In fact, in 2015, Bankrate states average rates range from 6 to 11.5 percent. Compared to a payday loan with an APR of 400 percent, you’ll save a massive amount of money paying off payday loans.
Look into Debt Consolidation
Not everyone will qualify for a personal loan. When that happens, you still have options. A debt consolidation company works with you to get your debt to a level you can manage. They also teach you how to manage your money in the future. Your state will have listings of the best debt consolidation companies to help you pay off payday loans. You don’t want a company that will take your money and disappear, so ask the state for referrals.
The key to making debt consolidation work for you is to compare programs, make sure you do not repeat the cycle of debt after you pay off your payday loans for good. It’s essential to cut expenses and keep them down after signing up for debt consolidation.
Build Up an Emergency Fund
Use the money you save with personal loans or debt consolidation programs and start building an emergency fund. If you make $1,000 a week, if you set 10 percent ($100) aside each week, by the end of the year, you have $5,200 plus interest. Only use this money for emergencies, such as car repairs, appliance malfunctions, and medical bills. By having an emergency fund available, you will avoid having to take out cash advance loans in the future. You’ll never be in a position where you have to payoff payday loans again!