Working in the finance industry, I often receive calls from client’s looking for relief from their payday loan. Payday loans can be found under many different names – check advance loans, deferred deposit loans, cash advance loans, post-dated check loans which are all terms which represents a short-term high interest rate payday loan. Although I continue to receive calls regarding student loan debt, credit card debt, and accounts in collections, it is the high interest rates, and rollover fees associated with the payday loans that seem to cause the most despair.
Why Payday Loans
According to an article written by Megan Leonhardt, the average payday loan has an APR of more than 400%. Why would you want to take out a payday loan with an APR much higher than a credit card loan? Like many others, my clients have used payday loans to make ends meet. Their poor credit leads them to believe they can’t secure funds by any other means. The payday lending process does not typically require a credit check and is one of the reasons this type of loan is utilized. Other clients have used payday loans because they have no credit. My client, Becky, mentioned she used a payday loan because she needed money right away. Becky’s bank account was in the negative and her rent was due. She mentioned her payday loan was fairly easy to obtain for her emergency situation. There were no barriers to her obtaining the funds quickly. Becky stated she felt she needed the funds to survive and her payday loan of 400%+ APR didn’t stop her. Because you can typically secure a payday loan quickly with just a valid ID, a bank account, no credit check, and proof of income, such as a pay stub, those with a financial emergency, or with poor credit or no credit may view payday loans as a quick solution to their need for cash. Though the “quick solution” lenders have the ability to pull the money owed directly from the checking or savings accounts, our clients are relieved to learn that Apprisen can help with payday loans, as many of the lenders make accommodations to help clients repay what they owe.
Here is My Top 7 Survival Tips to Assist in Breaking the Payday Loan Cycle:
- Get a cash advance through your credit card at a much lower APR and lower fees.
- Ask a relative to lend you the money. Check out the Save Money Through Friendships Blog.
- Boost your income to help manage the debt.
- Negotiate a payment plan with your payday lender directly or with the help of a NFCC certified credit counselor.
- Charge the payday loan balance to your credit card that has a much lower interest rate than the payday loan.
- Apply for a loan through a credit union or a small local bank to pay the payday loan in full.
- Complete a session with a NFCC certified credit counselor.
Active duty service members and their dependents earn certain payday loan protections. For example, payday lenders can’t require access to the service members or dependents’ bank account. In addition, the payday loan must have an APR of no more than 36%. If you are an active duty member, please contact the Department of Defense regarding your payday loan concerns.
It can be stressful when the payday process involves you writing a check for the entire balance plus the fees for borrowing the money. If your rollover fees are keeping you up at night, then it may be time to speak with a NFCC certified financial counselor. Why agonize over the additional payday loan fees, and the ever growing balance associated with your payday loan rollover? You can speak with a NFCC certified financial agency like Apprisen to receive recommendations regarding your budget and, most importantly, obtain an action plan to escape the payday loan cycle and repay your debts.