How to Deal With High-Interest Payday Loans

High-interest debt of any sort can be crippling to your personal finances. Payday loans, in particular, are often among the most difficult type of loans to pay down due to their exceptionally high interest rates and high penalties for late payment. Many states have taken action against the predatory nature of certain payday lenders. If you find yourself chained to such a product, take heart: You do have options available to you.

Instructions

1

Call your payday lender and ask about their prepayment policy. Some lenders require that you carry them to the full term to avoid paying additional fees.

2

Review your current assets. If you own anything with enough value to pay off your payday loan (e.g., a car), you'll need that item. Even if you have a current auto loan, you may be able to refinance it and use the additional equity to pay off your payday loan.

3

Visit your local credit union and apply for a loan with your personal assets as collateral. Credit unions are financial nonprofit institutions that often have lower fees and rates than banks. Secured loans (those using collateral such as your automobile) have lower interest rates than nonsecured loans (e.g., personal loans or payday loans). If you don't have any assets with sufficient value, apply for a signature loan and explain that the loan would be used exclusively to pay off your high-interest payday loan.

4

Request a 10-day payoff quote from your payday lender. You should know how much you'll owe at a future date to avoid a remaining balance upon payoff or refinance. It's also a good idea to confirm the payoff address. Request that your credit union mail the payoff check directly to your payday lender to ensure that the loan is paid off in a timely fashion without fees.

5

Pay down your new loan diligently through your credit union, and don't revisit any payday lenders.