7 Steps to Get out of the Pay Day Loan Cycle
If you are struggling with payday loan(s) or you know someone struggling to payoff payday loan(s), please share this article. Here is a proven strategy that can be used to get you out of the payday loan cycle without filing bankruptcy or risking damaging your credit. Again, please review the following steps carefully and share this article with anyone you think may benefit from the information.
Step 1: Do not get another payday loan–no matter what happens. Basically, stop adding new interest debt.
Step 2: Get Organized. This step is particularly important if you have more than one payday loan. Write the name of each payday loan company, its corporate phone number, loan due date, interest rate, and amount due each pay period. Use a calendar and organize the information you collect. This will give you perspective and help you effectively organize a clear plan of action.
Step 3: Determine if Payday Loan Company is a CFSA Member. Contact each pay day loan corporate office and confirm whether or not they are a CFSA (Community Financial Services Association) Member. Most operating payday loan companies are members of CFSA . As a member, these companies are required to offer solutions to help consumers needing more time to pay back their financial obligation. One of these options CFSA member companies provide is an Extended Payment Plan (EPP). CFSA member companies are required to provide this option to any customer for any reason and at no additional cost.
Many employees may not be familiar with these terms so this is why you must speak to someone in corporate office and insist on speaking with a manager. (You should also read through your contract carefully and sometimes this information is plainly stated in the terms of your contract. Even if it is not listed on your contract, it may still be an undisclosed option).
Basically, to qualify for the CFSA EPP a customer must simply ask for the EPP by close of business on the last business day before the loan’s due date. This must be done by returning to the office where the loan originated or by using whatever method was used to obtain the loan. The customer will be required to sign an amendment to the loan agreement reflecting the new payment schedule. Under an EPP agreement, a customer may pay the transaction balance in four equal payments coinciding with periodic pay dates.
Again, there is no charge to enter into an EPP and the interest on your loan will stop while you are in this agreement. However, if a customer defaults on an EPP, a lender may charge an EPP fee and accelerate payment on the balance remaining, as authorized by law. The lender will not begin collection activities while a customer is enrolled in the EPP as long as all obligations under the EPP are met. Which means all collections calls must stop while you are in this agreement. (Note: You can have more than one EPP arrangement with different companies at one time.)
Step 4: Agressively attack your payday loans. Start with the biggest payday loan (Loan A) and work yourself down to the smallest one. This loan will usually have the most interest charged. Visit the storefront for (Loan A) and request an EPP on the day before your loan is due. Once you sign the appropriate paperwork you are typically granted and extension until the next payment due date. (So instead of your payment being due the day after you enter into the EPP installment payment, your payment will not be due until the next payment due date.)
Do not waste your cash, rather save any money you were planning to use to pay on (Loan A) the next day towards your first EPP installment payment which will be due in a couple of weeks. Again, it is important that you do not default on this EPP agreement.
Continue to pay at least the minimum due on any other existing payday loans w/out EPP Agreements. Note: Sometimes paying off your loans completely and refinancing is less expensive than just paying interest. For instance if you owe $650 to payoff Loan B and your interest is $100 you can opt to pay $650 and immediately refinance $550. Either way you are out $100 but since you have reduced your principal you may slightly lessen your interest rate. Every dollar you can save counts!!
Step 5: Develop a plan to gain extra money. Get a part time job; work overtime at your current place of business; have a garage sale; and/or contact your bank/credit union and see if you are eligible for an Advanced Deposit, Overdraft Protection, or a small personal loan. If you are successful dedicate these extra funds completely to paying off your payday loans. (Note: The fees/interest you pay in overdraft fees or a small personal loan will pale in comparison to the interest you are paying with your payday loan.) Remember, you must maximize every dollar and commit to using every extra dollar towards paying off you payday loans.
Step 6: Repeat step 4. The next pay cycle repeat step 4 with Loan B. If you need more leverage just wait a couple of pay cycles in between your EPP requests for Loan A and Loan B. Continue this process until all loans are paid in full. As soon as you pay off your first EPP installment loan continue to aggressively set up and pay on any remaining EPP installments. Remember if you have successfully entered into an EPP installment payment agreement with a payday loan company, you DO NOT have to worry about interest accruing; however, you must be sure you do not default on your agreement. So be realistic and DO NOT open too many EPP agreements at one time. Stagger these EPP agreements as needed to ensure you will not default!
Step 7: Start a savings. Once you have successfully paid off all of your payday loans, you WILL NOT be eligible for obtaining another payday loan from those particular companies for 12 months. This is actually a good thing as this will help you to commit to a budget from this point forward. You should now start a savings plan and prepare for future emergencies. Once you break this payday loan cycle you should have renewed confidence in you own ability to save for future emergencies that will inevitably happen.