How To Get Out Of The Payday Loan Trap
Getting out of the payday loan trap can be a tough job, the advertisements make it look so easy to get a payday loan – all you need is a job and a checking account and $300 can be deposited into your bank account by tomorrow. The lure of payday loans is tempting for many, especially those living on the edge and barely hanging on financially. Most people know the reasons why payday loans are a bad idea – they are ridiculously expensive, usually charging anywhere from $10 to $30 for each $100 borrowed and most turn into ruthless debt collectors should you happen to fall behind on the payments. Most payday loan companies allow borrowers to “renew” their loan when the payment comes due, but renewing comes with a high cost for the privilege. If a borrower renews their $100 loan four times at $25 per renewal, that original $100 loan is suddenly $200 and nothing has yet been paid on the principal – the borrower still owes $100 plus the cost of borrowing the cash.
But despite the drawbacks, hundreds of thousands of people take the payday loan or cash till payday loan bait and get into the payday loan trap, parting with money they can not afford to part with. The decision often leads to deeper financial crisis and a debt cycle that tends to include taking on additional loans to pay off the first loan. The best advice on dealing with payday loans is to avoid them all together. In most cases, it’s not necessary. The following ideas can help bring in a few extra dollars to meet short-term cash needs and avoid the payday loan trap.
Sell gold. You’re thinking “if I had gold to sell, I wouldn’t be in this position” right? Well, you might have more then you think. Gold and silver are currently selling at an all-time high and even bits and pieces of broken jewelry – necklaces, bracelets, rings and other items are selling for prices never seen before. The items are eventually melted down, so it doesn’t matter if the gold is in one piece or not. There are many companies that will mail you a pre-addressed envelope in which you place your broken gold jewelry, mail it in and several days later, receive a check for items and many people prefer the anonymity of conducting the transaction by mail. For those who need to pocket the cash a bit faster to get out of the payday loan trap, a trip to the local pawn shop might be more convenient. Many do buy gold at competitive prices and the turn-around is much quicker. If you happen to have jewelry in one piece – a ring that no longer fits or a pair of gold earrings you haven’t worn in years – now might be the perfect time to look into selling them. With the price of gold and silver at current levels, it is getting more and more expensive for jewelry makers to purchase metals, creating an upsurge in the used-jewelry market. Pawn shops and used jewelry vendors are great places to start, but if there isn’t one in your area, try posting an advertisement online or in your local newspaper.
Having a yard sale could help you get out of the payday loan trap. Most of us have things laying around that we can easily live without and a yard sale is a perfect way to clean out the closets and bring in some extra cash. A yard sale doesn’t need to be fancy, but you should have at least a few signs (handmade signs are just fine) advertising your sale and your items should be displayed in a way that makes it easy for people see what you are offering. It is sometimes surprising what people will buy and as the saying goes “one person’s trash is another person’s treasure.” If you are in doubt as to whether an item should be included in a yard sale, put it out, you might be pleasantly surprised. I once had someone buy a small bag of elastics (that I was going to throw away) from me for $1. If you have excess buttons, fabric, yarn, glass jars – anything, try selling them.
Sell Your Items
Sell what you can. Of course, if you don’t have a yard or a garage, having a yard sale can be tricky, but there’s always the online versions like eBay and other auction sites. Old college textbooks, batches of clothing, movies or appliances – an old coffee maker, toaster or hair dryer – you no longer use can often bring cash. Most of these things can also be sold online or by placing an advertisement in the newspaper. Check with your local pawnshop to see what items they routinely buy – you might be surprised.
Sell Homemade Craft Items
Craft your way out payday of the payday loan trap. Websites like http://www.etsy.com and others like offer a place for crafters to buy and sell handmade items. Whether you crochet blankets, sew clothes, make soap or string beads, the Internet offers a variety of ways to peddle your wares. Some churches and charitable organizations in your hometown might be willing to help you help yourself too. Most charitable organizations are so overwhelmed by requests for money these days (due to the economy and so many people seeking help) that they might welcome an industrious person who comes to them and says “I’m trying to avoid debt by selling cookies. Could I sell some in your lobby after church on Sundays?” Some now-famous cookie companies and television cooking personalities got their start selling sandwhiches or baked goods to churches and offices.
Another way you can use to get out of the payday loan trap is to donate plasma or sign on for medical research project. Although these might not be options in some small towns, in many urban areas, there are places that will pay donors usually about $25 for a plasma donation. Most are listed in the phone book or are easy to find on the Internet. Donating plasma is much like donating blood, but it takes a bit longer. Most organizations allow donors to give plasma at least once or twice a week. Volunteering for a medical research project is another option and some pay quite well. In most research projects, volunteers are used to test a variety of new medications or treatments. Some require overnight stays, others simply require a weekly check-in. http://WWW.clinicalconnection.com is a good place to start.
Still Cant Pay Off Your Payday Loan Debt?
If you still cannot pay a payday loan, you should immediately contact the payday lender and explain your situation. It is highly likely that the lender will offer to “extend” your loan for another pay period in exchange for additional fees. Since most payday lenders grant a huge fraction of their loans to a small number of repeat borrowers, you will not be alone in asking for a loan extension.
The amount you are charged for an extension will likely be slightly higher than the initial amoft for the loan. Most payday lenders will be eager to grant you an extension because the extended loan will result in increased fees and interest charges. In theory, you may be able to get a second, cheaper, payday loan from a different lender and use it to payoff the initial loan from the first lender. In practice, timing and transportation usually make this unfeasible.
In the rare case that a lender denies your request to extend your payday loan, you will be in a poor situation. If the payday lender cashes your postdated check (used to secure the initial loan), your bank will likely reject the check for “non-sufficient funds” and charge you a fee in the process. Most payday lenders have stipulations in their contracts allowing for additional fees in the event that your check is returned for non-sufficient funds. This will increase the amount of your debt in excess of the initial amount due. However, because the main recourse for payday lenders to collect from deadbeat borrowers is to sell the debt to a collection agency (for fractions of the full amount owed), it is unusual for a payday operator to take these steps.
One possible strategy, if you know you cannot pay a payday loan, is to immediately contact your bank and place a stop-payment on the postdated check you used to secure the loan. This will save you the bank fees you would have incurred had your checking account become overdrawn. You will likely owe the bank a stop-payment fee of $5-10, but avoid an overdraft fee of $20-30. Of course, you will still owe the full amount to your payday lender and it is likely your contract covers this case and you will be hit with additional fees as well.
Be very careful if you decide to place a stop-payment on any check you used to obtain a payday loan. Regulations vary from state-to-state, but there are possible criminal penalties in states that consider this process to be writing a bad check. In most states, the fact that you wrote a postdated check in consideration for the payday loan prevents the payday lender from pressing criminal charges. You would be well advised to familiarize yourself with the laws in your state or speak with a legal-aid attorney before placing a stop-payment on a check.
The best and most obvious solution, if you cannot pay a payday loan, is to sell possessions or borrow money from friends and relatives to ensure that you repay the loan. Debt from payday loans can create a vicious cycle where you fall further and further into debt with each successive loan extension. It becomes more difficult each pay cycle to cover the past-due interest from previous loans and your choices become worse as time passes. In the worst-case scenario, try to work out a longer-term payment plan with your payday lender and be sure to have any loan adjustments or extensions in writing.
Reevaluate what you really need. Sounds easy but it’s actually such a tough job that many people avoid it all together. Sit down with your bills in your hand and decide what you can live without and how you can reduce your monthly obligations. Is your cell phone service costing you more than it should? Are you getting the best auto insurance rates? Do you really need all those cable channels? Is there a way you can save money on your electricity bill, perhaps by turning down the air conditioning or heat? Is there a way you can save money on your monthly food costs, perhaps by cooking more home-prepared meals? It can be hard to look at the way you are living and while expenses down to the minimum, but once you do, you’ll discover that the temptation for a payday loan quickly disappears and it will be easier to get out of the payday loan cycle. And when you do discover ways to save money on your living expenses – even if it’s just $10 a month – be sure to set some of that money aside each week and save it for future emergencies.