The Truth About Payday Loans & Debt

At some point in their lives, almost everyone has struggled to pay the bills. When money is extra tight, most people search for a viable option to solve their money problems. One of those options is to head out to your local payday loan business and get some money in advance. A payday loan might help you hold off the bill collectors for a while, at least until your next paycheck comes. Sadly, while a payday loan often sounds like the perfect quick fix, this form of borrowing can carry more problems than it’s worth. In fact, it’s likely that you could end up in even worse debt than you struggled with before the loan.

How Payday Loans Work

Let’s say you walk into a payday loan store and ask them for $200 to hold you over. You get that money right away and you’re off and running again. But you only get that money for 2 weeks. Remember, this is a payday advance, which means you only get it until your payday comes along. Of course, you’re also going to get charged a small fee for being able to borrow that money. Let’s say they charge you $20. No big deal, right? You have the money you need and paying that little bit extra won’t be a big concern.

It’s not a big concern until that two-week time limit comes and your bill is due. Now you have to pay that $200, plus the $20 fee. Unfortunately, you find that you have even more bills to pay or more expenses. You really don’t have that $200 to pay back yet; you definitely don’t have $220. So what do you do? You have to go back to that payday advance place and let them know you don’t have the money. That’s not a problem, just get an extension. So for another $20 you can keep the money for another 2 weeks, which is great, until that two weeks is up, and the whole thing starts all over again.

Don’t Get Stuck In A Debt Spiral 

Lots of people find themselves trapped in this type of debt spiral, where they don’t know how to make ends meet, borrow a little bit of money and then find that they can’t ever pay it back in full. It happens more than you’d expect. In fact, research shows that up to 80% of people who borrow money through payday loans aren’t able to pay their loan back by the first deadline. It’s unfortunate, and it’s a sort of debt that no one wants to be stuck with, but it’s happening to more and more people every day. The key is to avoid the spiral entirely, but of course, that’s not quite as easy as it sounds. 

What you really need to do is make sure that you’re staying out of this spiral in the first place. Avoid borrowing money from payday loan companies. Budgeting is crucial, and even though it’s difficult, it’s going to make a huge difference for you in the long run. You’ll be much better off by cutting back, instead of trying to make things work out with that extra payment to the payday lender hanging over your head.

What If I’ve Already Taken A Loan?

If you absolutely cannot avoid borrowing money from a payday lender, or if you’ve already borrowed money and now you’re looking to get yourself out of that hole, you’re going to need to make some payments. Making just the minimum in payments is never going to get you anywhere, because you won’t even be paying off the fees each week, let alone the actual amount that you borrowed. What you need to do is make sure that your payments are large enough to at least put a few dollars toward that full payment. Keep in mind that the original borrowed amount is still going to be there waiting for you if you aren’t careful, and it’s going to come after all those $20 fees.

If you can pay just $25 or $30 each pay period, it’s going to slowly cut down on the amount of money that you owe. Paying only the borrowing fee means that you break even every two weeks. You will struggle to catch up. If you are already in debt, make sure you’re paying something, even if it seems like a small amount. With this debt in need of payment, make sure you’re working as hard as you can to keep yourself from spiraling down further and further into more debt.