Courtesy of Searchengineland.com
Imagine that you owe over $5000 to several payday lenders. This could be a devastating situation for some people. Usually, the avalanche of debts starts with a small loan that you don’t know how to pay off. At some point, periodic payments may start eating up to 100% of your income (maybe, even more). However, you can get out from this seemingly eternal cycle.
There are people who have multiple debts. There was a case when a single man had 24 (!) loans. He didn’t know what to do.
Payday loan shops are popping up here and there. Nonetheless, the problem is that many people do not know how to use payday lenders’ services. Companies only offer specific options and products. It is up to a client to decide whether they want to purchase that product. Sadly, many people do it without reading between the lines.
People also started to pile up debts due to an abundance of online outlets that offer quick cash without even forcing you to go out. The cycle starts casually. You may need a small amount of money to pay your utility bills on time or change tires. However, a single loan does not save you. In fact, you will have to pay back but you are still short on money. In fact, you may have even less money due to commissions. This is why you must calculate whether you will be able to pay off debts.
Over 30% of people who want to restructure their debt have at least one loan that comes from a payday lender. The vast majority (over 70%) have more than one payday loan that burdens them. The average number is quite frightening. An average debtors owe over $3.400 to 3 or more lenders.
However, there are some actions that you can take in order to save yourself from falling even deeper into the debt pitfall. One of the solutions is to get rid of many small payments and consolidate the debt into a single one. Your new interest rate will be determined by your credit score. People with lower credit score will have to pay higher rates. There is nothing anyone can do about it. Note that breaking a cycle is more important than paying a little extra. Trying to pay back to a bunch of lenders on different days of the week is stressful and bothersome, but a single debt (even with a slightly higher overall interest rate) is much easier to pay.
What worries the most is that people often skip important lines in the contract when they take money. Many do not even notice the real amount of money that they will have to pay. Lenders must point out the total cost of borrowing and they do, but that line can be hidden somewhere in the document in a place where you won’t even notice it.
Another good idea is to ask for money from a non-profit credit counselor. They will help you to enter negotiations on the right note and reduce the overall cost of borrowing to a less frightening amount. The problem is that consolidation of debt is a process that requires all lenders to agree to give up their personal interest and consolidate. The negotiation process can be complicated.
One of the best advices to people who want to get a credit is to not take too much. There are people who own money to payday lenders, but their overall debt could as high as $50 thousand with a large portion of that sum being formed by other insecure debts. Credit cards are the real plague of the society and most of people in America have problems with credit cards.
Another good advice to all potential debtors is to start building a small emergency fund right away. Taking a payday loan now and then is not a problem if you can control your expenses and have a backup cash reserve that will protect you from borrowing too much. Just don’t ever get in a situation when you take 2-3 loans simultaneously.