Payday loans (PDLs) are among the most expensive loans available, with interest rates sometimes approaching a whopping 400 percent, according to the Federal Trade Commission. The loans are so costly that some states prohibit them. Help for payday loan debt is available from organizations and programs specializing in managing excessive debt.
Considerations
Some people desperate for cash make their problems even worse with payday loans. The loans are usually for several hundred dollars, but due in two weeks. Borrowers who cannot pay the full amount can extend the loans for another two weeks by paying a fee. Some debtors find themselves juggling multiple payday loans at once. That can make the loans an endless cycle of debt and possibly lead to court judgments and wage garnishment if the debtor defaults on a loan.
Self-help
The best option for handling payday loans is simply to pay them and avoid rollover fees. There are no state, local or government loans for consolidating payday loan debt. Also, as of 2011, no grants are available for paying the loans. Borrowers with payday loan debt should consider selling personal belongings or securing temporary or part-time jobs to pay the loans in full.
Debt Consolidation
Debtors with payday loans can also consider consolidating the loans. A bank or credit union may offer a debt consolidation loan to pay off a debtor's payday loans. However, some users of payday loans are already overextended on credit or have poor credit scores. That makes qualifying for a debt consolidation loan difficult. Offering collateral, such as a paid-for automobile, or vacant land could help.
Counseling
Government-certified credit counselors can also help. The U.S. Department of Housing and Urban Development (HUD) maintains a list of counseling agencies offering expertise in credit and housing. The agencies can recommend local lenders who may offer debt consolidation loans, or analyze the debtor's budget for suggestions on reducing expenses. Cutting back on expenses such as cable television or cell phones could free up enough money to pay off payday loans. Debtors can find a local credit counselor by visiting the HUD website.
Bankruptcy
Credit counselors can also provide complete information about bankruptcy, which offers an effective, although extreme, solution for payday loans and other debt. Chapter 7 bankruptcy eliminates unsecured debt such as payday loans in just a few months. Chapter 13, another form of personal bankruptcy, requires a payment plan of three to five years. Usually, only people with low income qualify for Chapter 7, while Chapter 13 is available to anyone.
0 comments:
Post a Comment