How to Get Out of Payday Loans?

Are You Trying to Get Out of a Payday Loan Nightmare?

Payday loans offer convenience to consumers who need money in a pinch, but this kind of loans has the potential to create a financial nightmare for customers who don’t manage them properly.

Payday loans often come with high-interest rates and fees that can make it difficult for some people to repay the loans. In addition, many lenders will charge a “rollover” fee that can trap unsuspecting borrowers in a never-ending cycle of debt.

Thinking about some common scenarios shows why people may need payday loans. If your car were to break down, or if you had a sudden unexpected bill, would you be able to cover the financial cost?

Imagine you got laid off, and suddenly your $1,200 mortgage payment is due. Do you have money in savings to ensure you stay current on the mortgage?

The sad reality is that as many as 58% of Americans have $1,000 or less in savings. Many people do not have any savings at all.

Unlike traditional loans that require a lot of paperwork and processing time, payday loans require less time and have higher approval rate compared to traditional loans.

Because of this quick access to cash, many people take out payday loans despite the higher interest rates and fees that often come with them.

Ways to Get Out of Payday Loans

If borrowers can’t repay their payday loans, their accounts could be sent to collection agencies and reported to credit bureaus, which can further damage their credit score. What can be done to pay off payday loans once and for all?

Negotiate extended repayment options

If you get off track or find yourself struggling to make your payments, call the lender immediately and ask what payment options they have. In most cases, lenders will want to receive the money they are owed, so they may be flexible about the way that you repay your obligation.

Use other sources to pay off the payday loan

As an alternative to working out a repayment plan with a lender, there are many ways to get money from potentially cheaper sources to pay off expensive payday loans. Consider the following ideas:

What to Do Once You Pay Off Your Payday Loans

Avoid taking out new payday loans

The best thing that you can do to stay out of future payday loan problems is to avoid taking out new payday loans and only consider them as an option of last resort.

Learn about the most common pitfalls of payday loans so that you can protect yourself and make smarter financial decisions in the future. The most common pitfalls of payday loans are:

  • Getting a loan from an unlicensed lender
  • Getting a loan from a lead generator
  • Getting a loan with excessively high APRs
  • Getting hit by hidden fees
  • Getting stuck in a debt trap

Try to get money from a source other than payday loans

Additionally, when you do need money quickly, try to find alternative sources of extra cash to avoid relying on payday loans. Common alternative sources to payday loans include:

Develop healthy financial habits

It is difficult to stay out of debt and avoid payday loans if you don’t develop healthy financial habits. Below are the most basic financial habits to help stay out of debt:

  • Build an emergency fund. It’s generally recommended that you build an emergency fund worth 3 to 6 months of living expenses. Even if it’s not possible in your situation, saving as little as $10 per month gets you in the habit of saving money.

  • Avoid bad debt. Typical bad debts include credit cards or any other high interest debt such as payday loans.

  • Build good credit. There are certain things you can do right now to start building good credit. Below is a quick summary of some of the action steps that could lead to a higher credit score over time:

    • Pay your bills on time
    • Keep your credit card balances low
    • Don’t close old credit cards
    • Always keep a small balance on your cards
    • Open and maintain a healthy credit mix
    • Don’t apply for too much credit
    • Get a monthly copy of your credit report
    • Dispute inaccuracies

If you have tried everything suggested above and still find yourself looking for a payday loan, consider applying for a loan from LendUp. We are a safer alternative to traditional payday loans because we don’t have rollovers and debt traps.

Our financial education courses can help you climb the LendUp ladder (where available) so that you can have access to more money at lower interest rates over time, and you’ll get a chance to improve your credit score along the way. Click here to get started.

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