How do you break the payday loan cycle?

Answer 1

There are a variety of not-for-profit credit counseling companies available to people having challenges managing their money. There are few, however, that are focused on payday lending.

If you are in a troubled payday loan cycle, the goal is to stop relying on the payday lender to keep you going. Accordingly, consider the following steps:

* Prepare a budget that lays out what needs to be spent on required items (e.g., rent, food, electricity) and non-required (disposable) items (e.g., restaurants, movies, etc.)

* From your income, subtract the required items to end up with how much you are able to spend on disposable/non-required things

* Assuming there is a difference, begin applying that difference to your payday loan

In the mean time, consider the TIMING and/or SIZE of your required payments as follows:

* Call your creditors and request to change the dates on which payments are due - you may find that there are just timing issues, not an inability to pay, that forces the use of payday loans

* Call your creditors and see if you can set up a budgeted payment plan where the amount you pay per month is the same (allowing you to plan the same amount each month for important expenditures)

Finally, if it still seems like you are a way off from ending the cycle, consider changing how you use the payday loans:

* At each extension period, borrow a lower amount (e.g., instead of $700, take only $600), relying on the money found in previous steps to no longer require as much