Helpful Debt Advice Regarding Payday Loans
Debt is never something you can forget about. Sure, if it’s from a family member or a friend, forgetting or delaying payments is acceptable as long as you keep the communication clear. However, when you take out an organizational loan, it’s crucial that you stick to the terms.
Among the many debt types, we’re primarily focusing on payday loans. At least, for now. Payday loans are globally considered delicate if you’re unsure of how to pay them back. But it doesn’t have to be as intimidating as many people make it.
No one can deny the fact that debts sometimes become the only and one solution to overcome some tough situations in life. Because they become particularly necessary, people don’t have to feel intimidated to initiate them. Nevertheless incurring a debt in your life requires particular attention.
On this page, we’ll share some debt advice that you should benefit from. While we’re providing them in the context of payday loans, you can apply this advice to any debt you may incur in life.
Why are Payday Loans Considered Delicate?
The main reason a lot of people are intimidated by payday loans is simply because of the high interest and associated fees. It’s not bad in any way as long as you manage to pay back the lender in time. But if you miss a payment, that’s where the spiral effect begins. It’s very similar to how missing a single credit card payment can lead to financial ruin.
The difficulty of this kind of loan is explained right in the name. You get a very short time to pay it back. Ideally, it’s the day that you get your pay from the employer.
The problem arises when you take out a loan without reading the terms. Payday loans are perhaps the most expensive type of loan on planet earth. The APR reaches upwards of 500% annually! From this interest alone, it should be apparent how serious taking a long-term payday loan can be.
Thankfully, we have some efficient tips up our sleeves that we’d like to share with you.
Advice for Relieving a Payday Loan
The very first thing you need to do is accept your situation. Whatever the reason was behind this, it doesn’t matter anymore. So, your goal is to get out of the situation as soon as possible without paying much in damages.
By the “situation”, we’re of course referring to you missing the due date for the payday loan repayment.
Find Yourself Professional Help
Either out of embarrassment or some other reason, most people with a loan default deny seeking professional help. In reality, that’s the best course of action. By professional, we’re referring to individuals from the finance industry who can help you.
There are plenty of credit counselling agencies in Canada where you can turn to. It’s a good practice if you consult a professional even before seeking out a loan. The counsellor can evaluate your overall financial condition, factor in the APR and all other fees, and advise whether you should take the loan or not.
If you qualify for a loan, the advisor can also help you plan the repayment process so that you don’t risk missing out on the due date.
Keep Paying in Time
Another common mistake we’ve noticed among borrowers is that they freak out and stop paying for the loan when they default on a deadline. It’s one of the biggest mistakes you can make. It’s simply because the longer you postpone, the more you’ll end up paying interest and late fees.
The key here is to keep paying. If you took the loan on an installment plan, stick to it by paying the initial late fees. Remember, bank overdraft fees are way less than the payday loan interest. Don’t you think having an empty account is better than accumulating fees on a loan you used long ago?
Take Out the 2nd Loan
We know this sounds very counterintuitive. Taking out a second loan to pay for the first one? Doesn’t make any sense, right? Well, keep reading to know how this is a good idea.
The other loan you take must be from a mainstream financial institute or someone who can lend you the money for a long time. It’s never a bad idea to seek help from a family member in a desperate situation.
Even if you take a personal loan from a bank, the APR is around 4% to 7%. Isn’t that better to deal with than dealing with a 500% APR loan? We sure think so. You can use the second loan to pay for the payday loan and break the debt cycle. From there, you can gradually pay for the personal loan as they have longer tenure.
Debt Management Programmes
Unless you’re in really bad financial condition with lots of outstanding debts, this advice is not recommended. It’s simply because enrolling in a debt management programme in Canada usually impacts your credit score.
This process starts with your consulting with a credit counsellor. Once you enroll in a programme, the counsellor will work with you to negotiate with the creditors and help make the payments easier for you. Of course, within reason. If you get solid help, it’s even possible that you get 4 to 5 years to pay off all your debts!
The problem with this approach, however, is that your payday loan lender is not legally bound to accept this offer. This is why we always recommend reading user reviews of a platform before you knock on their doors for a loan.
If you think risking your credit score is not worth it over the debts, you can go for debt consolidation. It means exactly what you think it means. You group all of your debts into one amount and you pay portions of it off every month. In fact, there are debt consolidation loans available in the country. The APR is way less when compared to payday loans.
Things that can save lives as well as take lives are only found in mythologies. A payday loan is as close as we can get in real life. But dealing with such a loan doesn’t have to be any harder than it already is. All you have to do is seek professional help whenever necessary and go through the proper channels of communication.