How to Pay Off a Payday Loan
Payday loans are short-term loans that can be borrowed based on the amount of money you currently make. Typically, you are charged a fee per every $100 you borrow, making the interest rates in the triple digits. Often people get into a viscous cycle because they can postpone their payments and just pay the interest, which keeps in debt indefinitely.
- Avoid the trap of paying on the
interest only on your next payday. Keep in mind that a payday loan
is a short-term solution, and therefore, you should plan on paying
the loan back with the interest on your next payday. When you take
out the loan, it is directly deposited into your bank account and
then withdrawn with interest on your next payday. - Make sure the money for the loan
is in your account when the date draws near for the repayment. If
you absolutely cannot pay back the loan when it is due. Ask for an
extension from the lender and just pay the interest, which will
depend on the amount you borrowed. However, avoid doing this more
than one time because the cost of the overall loan can reach in the
thousands with the amount of interest you are paying when only
paying the interest. If you pay on only the interest, you will still
have to pay the full interest on the loan as agreed upon in the
contract. - Borrow the money from a savings
account or family member to make sure the money is in the bank the day the loan is scheduled to be paid back. It is cheaper to
repay a family member or replenish your savings account then to keep
putting off paying the loan by only paying the interest.