How to Get Out of a Payday Loan Debt Cycle

Inside Subprime: Dec 14, 2018

By Lindsay Frankel 

While payday loans may have short terms, they create long-term debt problems for most borrowers. In fact, most borrowers end up paying more in interest and fees than the principal amount of the loan. That’s because costly payday loans are difficult for cash-strapped individuals to pay off on time.

Four out of five payday loans are renewed or rolled over, leading to mounting interest. For low-income families already struggling to make ends meet, these predatory loans are unaffordable. Interest rates vary by state, but average four hundred percent; payday loans in Idaho cost borrowers an average APR of 582 percent.

But the payday loan debt trap, while seemingly insurmountable, doesn’t have to cause financial ruin. There are several strategies you can try to get out of debt:

Start with the High-Interest Debts

If you have multiple outstanding loans or other forms of debt, you’ll want to knock out those with the highest interest rates first. This will reduce the total amount you end up paying. Payday loans are probably your most expensive debts, but paying them off can be tricky. You may need to secure additional income, or seek help from relief organizations or friends and family.

Request an Extended Payment Plan

Talk to you lender and request an extended payment plan. Reach out to the loan provider before your payment due date and if they agree, the lender will draw up a new agreement that divides your balance across future pay periods, so paying off the loan becomes more manageable. As long as you don’t default on your payments, the lender will not tack on additional fees.

Some states mandate lenders provider and extended payment plan option, but it won’t be offered to you automatically; you’ll need to contact the lender and make a request.


You may be able to take out a lower-cost loan to help cover your high-interest debts. You can try talking to credit unions, which often offer payday loan alternatives , but you’ll likely need to be a member for a period of time. A personal loan is also an option for some. If you have bad credit or lack credit history, consider taking out a no credit check installment loan, which has longer terms and lower interest rates than payday loans. This option will also help you build credit, so you can work towards a healthy financial future.

Seek Payday Loan Debt Relief

In some ways, asking for help is one of the most difficult paths out of debt. Try reaching out to friends and family first and explaining your situation. Paying back someone you trust who won’t charge interest can make debt repayment manageable. Alternatively, you can try asking your employer for an advance on your next paycheck. Just make sure you’ll have the funds to cover your expenses once the loan is paid off.

There are also a number of nonprofit organizations that may be able to offer assistance. According to the Federal Trade Commission, “Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs.” Some nonprofits and faith-based organizations may even be able to provide financial assistance in addition to guidance. Just be aware of scam artists who charge high fees for counseling services while promising to get you out of debt.

If you find yourself trapped in a payday loan debt cycle, know that you’re not alone, and there are solutions. Once you’re back on your feet, you’ll want to set up a savings plan to avoid needing to borrow in the future.

For more information on payday loans, scams, cash advances, and title loans, check out our state and city financial guides.

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