Whenever you find yourself struggling to keep your finances afloat, you need to consult with a reliable and trustworthy company that will offer you free advice and a solution to this problem. We offer professional, free, and quick advice to help you stay debt-free.
Payday loans tend to be very difficult to get rid of but there are solutions to this problem such as:-
- DMP (Debt Management Plans) – This is an agreement made between the creditors and the debtor where you pay your debt in installments that are affordable at a time that is convenient for you.
- IVA (Individual Voluntary Arrangements) – An agreement that is formal between you and the lenders that allows you to pay a certain percentage of the debt in monthly installments that are affordable and usually run for about five years.
Payday Loan
A payday loan is a short-term loan that is usually unsecured. It is mostly for people who find themselves in a financial crisis or are met by an unexpected expense. Despite the amount loaned, you are expected to repay the debt by the next paycheck which makes it difficult for most borrowers to manage.
Despite the amount of money loaned, the borrower is expected to repay the entire amount by the next paycheck. These short-term fixes can however turn into long-term problems for the borrower as they have very high-interest rates.
What happens when you default payment is that the lenders get your bank details so that once the money is in your account, it is automatically transferred to their account. To avoid further interests and charges, it is vital to have money in your account on the designated day of payment.
A payday loan should only be used to address short-term lending needs. This is to say that you should use the payday loan if;
- You can pay the whole amount including interest by your next paycheck
- You only require the loan for a short period of time
- You only need to borrow a relatively small amount of money
To better understand how a payday loan works, it’s important to look at the upside and downside of it:
The Upsides of Payday Loans
- They can be an effective short-term solution
- Loans can be in your bank account quickly
- Getting a loan is easy and quick
The Downsides of Payday Loans
- You will be required to make quick repayments
- A payday loan can have an interest rate of up to 600% in comparison to other loans.
- A payday loan is mostly for offsetting other loans, including previous payday loans
- Interest rates are high
What Happens if I’m unable to Repay My Payday Loan?
There are three options to consider if you are unable to repay your payday loan.
- Take another loan to offset the previous one
- Ask your lender to roll over the amount to next month
- Contact a loan consolidation company for an effective solution
How to Avoid Payday Loans
Most times, a payday loan will be taken out to cater to any unexpected expenses. It is therefore important to try and reduce any monthly expenditure including;
- Carefully note your outgoings and incomings-This will help you analyze your finances and identify areas in which you can reduce your expenses. This can be changing insurance covers, and switching shopping markets
- Keep some money aside as a security blanket: This is a great plan to fall back on whenever you are struggling with finances.
- Reach out to your mortgage lender: It is possible to take a break on mortgage payments up until you can afford them comfortably.
- Consult financial experts- Are you dealing with debts that are giving you sleepless nights, make the wise decision to contact us at the Encompass Recovery Group where we will give you advice and well-thought-out solutions to help you on your journey to being debt-free.
We will work with you and your lenders to ensure that you get a payment plan that is convenient and tailored according to your budget. We will also negotiate lower interest rates to help you pay up in good time and continue to live your life comfortably. Do not hesitate to reach out to us.