How to Get Out of Payday Loan Debt Fast

Getting trapped in the payday loan cycle is deceptively easy. First, you run into an emergency expense you can’t cover. You don’t qualify for traditional forms of credit (like credit cards), so you figure taking out one payday loan can’t be too bad.

But the interest adds up fast, and you can’t afford to pay by the due date, so you roll over the loan or take out another to cover it. That buys you more time, but thanks to exorbitant interest rates, the debt just keeps snowballing.

It’s easy to feel trapped, but there’s a way out. Take a closer look at how to get out of payday loan debt.

How to get out of payday loan debt

Payday lenders count on borrowers becoming so overwhelmed that they just keep rolling over their loans. Getting out of payday loan debt takes intentionality and effort, but it’s worth it. These steps can help you start moving toward the other side.

Stop borrowing new payday loans

This is the first step. When you take out a new payday loan or roll over your existing one, you’re perpetuating the cycle. Do what you reasonably can to pay off your existing loan.

If doing that means you’ll struggle to pay basic expenses, negotiate with your lender. Many lenders offer extended payment plans or are willing to settle your debt.

Assess what you owe

Take a deep breath and look at your outstanding balance and the due date. If you can repay the loan in full by the due date, that’s often the best way to get out of the payday loan cycle.

Unfortunately, many people can’t afford to do this, and that’s why they’re stuck in the payday loan cycle. If you can’t pay by the due date, you should immediately get in touch with the lender.

Contact your lender about a repayment plan

Some payday lenders offer extended payment plans, or EPPs. These plans let you pay off your balance over a longer period of time. But unlike payday loan rollovers, EPPs don’t involve any additional interest or fees.

Unfortunately, not all payday lenders offer this option, but 16 states require lenders to offer EPPs, including:

• Alabama
• Alaska
• California
• Delaware
• Florida
• Idaho
• Indiana
• Louisiana
• Michigan
• Nevada
• South Carolina
• Utah
• Washington
• Wisconsin
• Wyoming

If you’re not in one of these states, don’t despair. Payday lenders who are part of the Community Financial Services Association of America promise to offer EPPs to borrowers having trouble repaying.

If you want to ask about a payment plan, make sure to do it early. Most lenders require you to contact them about EPPs at least one day before your payment is due. Even if your lender doesn’t offer EPPs, they may have other forms of payday loan debt relief.

Negotiate with your payday lender

If you ask your lender about payday loan debt relief and they say they don’t offer it, they may still be willing to work with you. Specifically, some lenders may be willing to settle the debt for less than the total.

It may be worth offering the lender a lump-sum payment of 50% to 90% of the amount you owe in exchange for closing the account. However, keep in mind that lenders are more likely to settle payday loans if they’ve already gone to collections.

What to do if your lender won't negotiate

If your lender won’t negotiate your loan, you have a few options. If you need to preserve the funds in your bank account for essential expenses, you may be able to ask the bank for a stop payment order. This order stops the lender from taking more funds from your account.

However, if you put a stop payment order in place and it’s successful, the lender might take aggressive actions to collect the debt. They may send it collections or even file a lawsuit.

If you can access lower-interest credit or borrow money from friends or family to repay the remainder of what you owe, that may help you close out the debt you have with the payday lender.

Alternatives to payday loans for covering expenses

If you live on a tight budget, getting out of the payday loan cycle isn’t going to solve the challenges of everyday life. Fortunately, there are several financially safer options to choose from.

Local assistance programs

Depending on where you live, you might be able to access several state, federal, and local benefits. These are some useful starting points:

• Call 211 or visit 211.org
• Visit findhelp.org and enter your zip code to find local resources
• Visit USAGov Benefit Finder to search and apply for benefits

Assistance programs may help you cover rent and utilities and access health care and food. When you have help covering essentials, paying down payday loan debt becomes easier.

Credit union payday alternative loans

Many credit unions offer payday alternative loans (PALs) to help protect borrowers from predatory lenders. PALs have interest rates capped at 28%. For the sake of comparison, payday loans typically have interest rates between 300% and 900%.

Payment plans with creditors

If you have medical debt, credit card debt, or other kinds of debts (and especially if you have a relatively low income), it might seem like you need to turn to payday loans to close the gap.

However, many creditors will offer payment plans or even pause payments temporarily while you get back on your feet. They don’t often advertise these programs, though, so you’ll likely have to contact them to ask.

How to avoid payday loan debt in the future

Once you learn how to get out of payday loan debt, it’s important to take steps to help yourself steer clear of it in the future. Work toward building an emergency fund, even if you can only put away $20 or so a month.

Building your credit can also be helpful. That way, you may qualify for personal loans, credit cards, and other lower-interest forms of credit.

Free yourself from payday loans with better credit

Many people turn to payday loans because they can’t qualify for mainstream credit options. Taking the initiative to build your credit can help you access lower-interest forms of credit and ultimately improve your finances.

Kikoff can help you get on the credit ladder. Our members can access an interest-free credit line that they can use to buy items in our online store. We report their on-time payments to all three credit bureaus, helping them establish credit history and improve their scores.

We don’t check your credit when you sign up, and it’s free to join. Start building credit with us today!