Four Simple Ways to Pay Off Multiple Payday Loans

If you have multiple payday loans and feel like you’re trapped in an endless cycle of debt, you’re not alone.

A recent survey shows 93% of respondents regret ever taking out their first payday loan. Additionally, 39% of those surveyed couldn’t afford to repay their loan on or before the due date. They had to take out at least one new loan to cover the first.

If you need help, there are some effective ways to get out of payday loan debt. Read on to learn which is right for you.

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Key points

There are three primary ways to pay off multiple payday loans: Professional debt relief, debt consolidation or bankruptcy
Debt consolidation will work for anyone who has a credit score that’s fair or better
Professional debt relief programs will be able to help borrowers with more than $1,000 in payday loan debt
Bankruptcy will work best for people with a large amount of debt who need a complete financial reset
It’s essential that you take action now before your situation worsens

How to pay off multiple payday loans

There are three primary ways to get out of payday loan debt.

Payday loan relief programs (professional help)

Best for: People with at least $1,000 in payday loan debt

Payday loan relief programs exist under many names, including payday loan consolidation programs, debt settlement programs and debt management programs.

These programs are available through professional agencies and are designed to help people pay off multiple high-interest, short-term debts. Once you enroll, an expert will represent you and work with your lenders to reduce or settle your debts.

Sometimes, the company will negotiate directly with the lender to reduce the loan fees or interest rates. Other times, they’ll pay the lender the total balance and give you a new loan you must repay over time. If negotiations are successful, you’ll repay less than the total amount you owe.

READ MORE: How to get out of payday loan debt

Pro tip: If your payday lenders refuse to negotiate and there are no settlements, you don’t have to pay the debt settlement company anything.

As with anything else, payday loan relief programs have pros and cons. So, before signing onto anything, make sure you know what you’re getting into.

READ MORE: Best payday loan relief programs

Get easy, legitimate payday loan relief with DebtHammer by clicking here and filling out our brief questionnaire.

Payday loan debt consolidation

Best for: People with credit scores of 670 or higher

Debt consolidation rolls your high interest loans into one new loan with a single payment, usually with a lower interest rate, higher loan amounts and longer repayment periods. There are two primary ways to do this: debt consolidation loans and balance transfer credit cards.

Debt consolidation loan (DIY debt settlement)

A debt consolidation loan is an unsecured personal loan used to combine multiple smaller debts. These loans have a lower interest rate than payday loans and come with a single, fixed monthly payment and term. This makes them easier to repay than several high-interest debts. Personal loans and home equity loans can also be used for debt consolidation.

To qualify for the best rates, you’ll either need good credit or a cosigner with good credit. Shop around for the best loan before applying.

Balance transfer credit cards

A credit card balance transfer is where you move one high-interest debt to a new, low-interest account. These credit cards usually come with a 0% or low introductory APR that lasts 6 to 18 months. Some also come with a balance transfer fee that’s between 3% and 5% of the transferred amount.

Pro tip: You won’t be charged any additional interest if you pay off the entire balance before the period ends. However, if the card still carries a balance at that point, you might have to pay deferred interest.

Before getting a balance transfer credit card, use this calculator to ensure it’s a smart financial move. This calculator estimates your monthly payments based on the starting balance, balance transfer fee and annual percentage rate.

File Chapter 7 bankruptcy

Best for: People who need a complete financial reset

Around 800,000 Americans declare bankruptcy every year. However, bankruptcy is a last resort and should only be done if advised by a lawyer. With Chapter 7, you can discharge certain debts, including payday loans and other unsecured debts.

Pro tip: Keep in mind, filing for bankruptcy comes at a high cost, and not just financially. It could result in the seizure of your assets or garnished wages. It also stays on your credit report for 7 to 10 years and will ruin your credit. It will become more difficult to qualify for loans during that time, and though some financial services offer loans for people who have filed for bankruptcy, the interest rates will be very high.

Laws that govern bankruptcy vary by state, so speak with a professional about your rights and what you can expect before filing.

READ MORE: Types of bankruptcy

Why payday loan consolidation or relief works

If you’re stuck in the payday loan cycle, payday loan consolidation can help in several ways. Some of the key benefits include:

Reduced fees and lower interest rates

Payday loans usually come with astronomical interest rates. It’s common to find APRs ranging from 300% to 400%. For context, a standard credit card or personal loan usually caps out at between 20% and 30% APR.

Considering the high interest rate of payday loans, it’s no wonder why many people fall into the payday debt trap. But with a credit consolidation service or personal loan, you can save hundreds or thousands of dollars throughout the loan’s lifetime.

READ MORE: Payday loan interest rates

Longer repayment terms

Personal loans usually have more flexible repayment terms that last between 12 and 84 months. Traditional lenders are also usually more willing to work with borrowers to adjust the plan based on their budget.

While longer loan terms typically mean paying more in interest over time, it also means more affordable monthly payments. This makes these loans harder to default on.

Fixed monthly payments

Payday loans can quickly become complicated, especially for those who roll over previous loans into new ones. With debt consolidation, you’ll only need to keep up with one straightforward payment plan and pay a fixed monthly amount. As long as the loan covers the full balance of your short-term loans, this can alleviate financial stress for those in over their heads with payday loans.

To learn more about the pros and cons of debt consolidation, check out this video:

Alternatives to debt consolidation

Although debt consolidation can work, it’s not the only way to pay off multiple payday loans. If you can’t get approved for a personal loan or payday loan debt relief program, here are several other options that can help.

Ask for extended repayment terms

Some storefront and online cash advance companies offer borrowers an extended payment plan (EPP). This gives the borrower the chance to repay the existing payday loan over a longer period. Typically, lenders offer this either because of state law or because they know they won’t get their money back otherwise.

If you currently have payday loans, ask your lender for an EPP loan.

Hire a debt settlement company

A debt settlement company — sometimes called a payday loan consolidation company — is a company that offers debt relief by communicating and negotiating with your lenders for you. They work to settle your debts for a lower percentage of what you initially owed.

Pro tip: Most debt settlement companies charge a monthly service fee or a percentage of each debt settled. During debt settlement, the company may also advise you against paying your debts. This could result in late fees if negotiations fail, but it could also make the lender or creditor more likely to agree to settle the debts.

READ MORE: Debt settlement fees

Debt settlement is not a guarantee. However, the average consumer sees a 20% to 50% reduction in their debts after paying the company’s fees.

Beware of scams, though, as there are many in this industry. Before working with a company, check their ratings on BBB.org or see if they’re licensed.

Work with a credit counselor

Nonprofit credit counseling agencies have certified credit counselors who will work with you to navigate your finances and get a handle on your debts. These companies often offer general credit counseling and Debt Management Plans (DMPs).

DMPs are 3- to 5-year plans that combine your eligible unsecured debts into one monthly plan. You must make regular, on-time payments to the associated account until the enrolled debts are fully repaid. These plans usually come up with a small startup fee and a monthly fee of $25 to $75.

The advantage of a debt management plan is that it can consolidate your payments into one and reduce how much interest you pay. Additionally, credit counselors know the current guidelines and laws set by the Consumer Financial Protection Bureau (CFPB) so they can provide the best guidance and support.

Pro tip: Credit counseling agencies work primarily with credit card debt. If you have a large amount of medical bills, personal loans, student loans or other forms of unsecured debt, credit counselors usually will not be able to help with those. In that case, debt settlement would be the better option.

For a list of approved credit counseling agencies, visit the United States Department of Justice’s official website.

Talk to legal aid attorneys

If you’re still having trouble paying off multiple payday loans, seek a lawyer who’s well-versed in debt settlement. A good lawyer can explain your rights as a consumer and advise you on how to get out of your payday loan problem. Some will work with you for free or at a reduced fee.

Pro tip: The Consumer Finance Protection Bureau has compiled a list of legal aids in every state you can use to find a good lawyer. You can contact your state’s bar association for a lawyer referral service in your area.

Your credit scores and credit reports matter

A person’s credit score and credit report help potential lenders and other entities like future employers or landlords gauge their creditworthiness. It also helps determine the rates they’ll receive when applying for financing and how much money they can potentially borrow.

You can also get copies of your credit reportsc from all three credit bureaus at annualcreditreport.com.

Break the payday loan cycle

Payday loan lenders are predatory. The industry is designed to keep bad credit borrowers in debt. Lenders primarily target people who are already struggling with their finances. Since they have such short repayment terms and high fees (plus no credit check), people often can’t pay them back on time. Then they have to take out a new one to pay off the first.

Every loan rollover comes with its interest, fees, and repayment terms, making each one more expensive than the last. Some lenders offer rollover loans to those who know they won’t be able to pay off their loans on time. This gives the borrower more time to come up with the money, but it also means a larger loan balance and more fees. This is what’s known as the payday loan cycle.

More than 80% of all payday loans are rolled over into a new loan or renewed within 14 days of taking out the initial one. Around half of these are part of a loan sequence of at least ten loans.

Even with a rollover loan, there’s no guarantee the payday loan borrower will be able to repay it when it’s due. In fact, around 20% of people who get a rollover loan eventually end up defaulting on their debt.

More options for payday loan help

Instead of taking out a payday loan, consider alternatives like cash advance apps or payday alternative loans (PALs).

Cash advance apps: If you have a stable job and need cash quickly, a cash advance app could help. These apps let you request a small portion of your upcoming paycheck early. They’re best for those with an emergency expense or bill due shortly before they get paid. We listed some of the best cash advance apps here.
Payday Alternative Loans: A PAL is a short-term loan offered to members of credit unions. There are two types of payday alternative loans, both of which are much more heavily regulated than traditional payday loans. They have a maximum APR of 28% and have an application processing fee of around $20. Eligible borrowers can take out a maximum of three PALS within six months.
Installment loans: These are another type of personal loan. Common types are auto loans, student loans and debt consolidation loans. These loans depend highly on your credit score, debt-to-income ratio and income. A higher credit score generally means better loan terms and interest rates. With an installment loan, you must make regular, fixed monthly payments on a specific date. Typically, these loans have repayment terms of at least six months, which makes them more manageable than payday loans.
Peer-to-peer loans: If you don’t qualify for traditional forms of financing, consider peer-to-peer (P2P) lending instead. This form of lending cuts out the third party and lets borrowers and investors work directly together. P2P loans function similarly to personal loans, so you can use the funds for nearly anything, including paying off multiple payday loans. However, these loans may have fairly high interest rates (usually 6.4% to 36%) and lender fees.

The bottom line

If you’re having trouble paying off multiple payday loans, you’re not in this alone. There are several legitimate ways to manage or reduce your debts, including debt settlement and debt consolidation. It will take time to become debt-free, but the best thing you can do right now for your financial situation and credit is to take immediate action.

DebtHammer: Legitimate payday loan relief that works

Getting out of debt isn’t easy, but we’re here for you every step of the way. We can help you negotiate with your lenders with an easy-to-understand plan with no hidden fees or “gotchas” and offer a simple monthly payment plan. Click here to start your free consultation.

FAQs

Do I need good credit to consolidate my payday loans?

Generally, the better your credit score, the better the terms you’ll get when applying for a debt consolidation loan. For decent rates, shoot for a 650+ FICO score. However, some financial services offer debt consolidation for borrowers with lower credit score, so you still have a few options.

Will the government help with payday loans?

The government will not help you make your payday loan payments, but there are some rules in place to protect you. Laws vary by state, but many state governments have put into place different rules and regulations related to payday loans. For example, states like Arizona and North Carolina ban payday lending entirely. Other states, like Montana and New Hampshire, have caps in place on the interest rates lenders can charge. At the federal level, the FTC also works to govern payday lending and protect consumers from deceptive advertising or predatory practices.

Are there any nonprofit payday loan consolidation organizations?

Some nonprofit debt consolidation organizations, such as credit counseling agencies, offer debt relief to those who need it. Some services, such as general counsel, are free. Others, like debt management programs, come with a fee. Since they’re non-profit, these agencies don’t charge any fees before using their service.

Can I consolidate ALL of my payday loans into one loan?

Yes, but it depends on how much you owe and how much you qualify for with a single loan. For example, a Payday Alternative Loan 2 will only allow you to consolidate up to $2,000. With good credit and income, a debt consolidation loan could cover a much higher balance.