Almost every one you in contact with is having financial difficulties, and a lot of people have resorted to taking out pay day loans to make ends meet. The purpose of the pay day loan is to give you that little extra until your pay check arrives, but it is all too easy to fall into a spiral where you are lending from various pay day loan companies and land up with a large amount of debt towards pay day loans and not enough income. The article on Reddit is lengthy, but here are some of the better ideas of how to break the cycle.
- Examine your expenses – You know that you are not earning enough money to cover your monthly or weekly expenses, but you need to see where you can save some money which you can then allocate towards your payday loans, if you have telephone, television, internet bills then cancel these services, and anything else you can do without until you are out of your debt. This would also include not buying any luxury items like that can of soda or take-away meal for a while.
- Sell Stuff – Take a good look at your personal belongings, everything that you have not used within the last three to six months, put in a box. Place a sign on your curb or put some signs up at your community boards that you are holding a yard sale and sell everything in the boxes. Do not expect to get lots of money for your unwanted goods, you cannot expect to sell a shirt you bought for $200 for $100, but once you have sold everything you will have some money which you can divide equally between the loans.
- Second Job and / or odd jobs – Accept the fact that you need to increase your income and find ways to do this, whether it is taking on a second job or doing odd jobs over weekends, you need to work more, earn more money and the extra money you earn you need to pay straight into your loans before spending it on items you do not need. There are a variety of internet sites where you can find odd jobs to do over weekends.
- Another loan – Contact your bank, a family member, a good friend or a loan company and take out ONE loan to pay off all the pay day loans. Make sure that you have implemented changes so that you can afford to pay off this one loan and promise yourself that you will NEVER take another loan unless it is a life or death emergency.
- Communicate with lenders – Speak to the pay day loan companies and see if they will allow you to pay the loans off over a longer period of time. Most companies will accept an amount that you can afford instead of having to take the loan all the way through to the collections stage.
- Documents – Make sure that you get everything in writing, keep a record of all the payments you make and when the loan companies agree to an alternative arrangement make sure that you get their new agreement in writing.
Here is an example of how to manage paying off 3 pay day loans:
You earn $1200 a month, divided into 2 checks of $600 every two weeks. You have 4 pay day loans which total $4000. You managed to collect $200 from your yard sale and you have bargained with 4 people in your street to wash their cars once a week for $10. You also managed to get a second job earning an extra $400 a month.
From the $200 you earned in the yard sale, pay each pay day loan $50. The extra $560 you earn each month is purely for loan repayments.
For the purposes of this example we are going to assume that you have managed to cut back on your expenses and have an extra $40 a month that you also allocate to your loan repayments.
In total you now have $600 a month you can spend on your debt.
Now let’s say that one loan is $700, one is $1300, one is $200 and one is $1800. Take a look at this graph and note that within a year you have paid off the debt AND you have an extra $400 which you could put into a savings account that you can add to every month!
Landing up in debt is easy, having the discipline to stick to a plan and see yourself slowly dig your way out is harder, but at the end of the day take it as a lesson learned and make sure that you keep to the promise to never take another pay day loan ever again!