Currently have multiple short term or payday loans out?  Odds are you are in the middle of the  paying back payday loans nightmare.  Unlike credit cards and other types of loans or credit lines, payday loans carry unimaginable interest rates and their payments can break the bank. Those who have become over-extended in payday loan debt often have no answers or ability to pay them back under their current terms. Why? Again in a word, interest.

Paying Back Payday Loans

Take an example of a borrower who takes out a $500 payday loan. The general terms of the loan may have a week or two grace before full payback is due, including interest. A typical finance charge for this loan could be around $8o. So you borrow $500 and pay back $580 two weeks later. BTW, that’s about 300% APR. If you can make that full payment, then borrowing the money for an emergency may still have made sense. Otherwise, for many the option is to just pay the interest and rewrite the loan again. Now when you do this, you are spending $80-$160 in interest each month on a $500 loan that never goes down. Now multiply that by a few loans out at one time, and the prognosis is disaster.

Breaking The Cycle

So what strategy can be used for paying back payday loans for those who don’t have the full balance? There are a few, depending on the situation. We will look closer at repayment programs in our second part to follow, most notably credit counseling/ debt management plans and debt settlement or negotiation services. For now, let’s look at some others.


One way to rid yourself of the loans is to declare bankruptcy if you can qualify. Unless there are other more crushing debt balances that you could include, filing bankruptcy for debt under $5000 or so rarely makes sense. Most attorneys will require around $2500 retainer to file. Not a whole lot of benefit to put yourself through bankruptcy to save such a small amount.

Debt Consolidation Loans:

First, odds are pretty good that if you had to resort to acquiring multiple payday loans, you don’t have the credit profile to support a single, unsecured debt consolidation signature loan. If you can, go get it and consolidate what you can.

Do Nothing:

Well sometimes that’s the only option for people who can’t afford the payments anymore. Unfortunately, that approach comes with inherent problems. Being sued comes to mind as one, but credit damage itself could be an issue. Many Payday loan lenders do not report account histories to the bureaus. Unfortunately that means in those cases, good payers get no credit if you will. However, default on the loan, and they will send you to a collection agency. Be sure your account history will be reported now, and not the way you would want it.

In our next post, we will discuss the two most logical options in detail. One being credit counseling programs, the other debt settlement plans.


October 14, 2016 No Comments bsi-admin News , ,