Get Out of Payday Loan Debt: Eliminate Debt with a Debt Relief Solution

Consumers regularly turn to an unsecured quick cash advance when they have a history of adverse credit. An absence of credit scoring means that a same day payday loan provides a convenient way to borrow money quickly to meet an urgent financial need. Although a short term loan, many customers find it difficult to repay the money they owe at month end. Paying back a loan for $1,000 and any accrued interest (typically $250) can prove beyond many people. However, it is possible to get out of payday loan debt with a debt free solution or secured consolidation loan.

Filing for Chapter 7 Bankruptcy to Get Out of Payday Loan Debt

Filing bankruptcy under chapter 7 provides a way of eliminating unsecured debt with full court protection in just 4 months. The basic eligibility requirements are that the applicant’s income should be below the state median and that any non-exempt assets should to be handed over to the trustee. The cost of hiring a bankruptcy attorney means that it will only be suitable if other unsecured debts (unpaid credit card balances, unsecured loans, medical bills etc) can be included in the arrangement. Filing chapter 7 bankruptcy will show on a personal credit report for 10 years.

Payday Loan Debt Consolidation

Unsecured loans won’t be available because of past credit indiscretions so consolidating debt won’t be an option for tenants or homeowners with insufficient house equity. It may be possible to consolidate payday loan debt with a secured homeowner loan. The rate of interest will be lower and it will be possible to spread repayments over an extended term. It will also be possible to put lots of different unpaid debts under one roof. Despite its appeal, think carefully before turning unsecured into secured debt as it gives lender greater powers to recover their money in the event of default.

Getting Out of Payday Loan Debt with a Debt Settlement Program

A debt relief program, such as a debt settlement program, provides a way to eliminate up to 50% of all unsecured debt. Any remaining money owed will then be repaid over a 12 to 36 month period. Lenders may be willing to freeze further interest payments, but they aren’t under a legal obligation to do so. If they don’t, other options are preferred as interest will accrue too quickly to make this debt free solution financially viable. The management fee is normally about 15% of each monthly payment.

Pay Off Payday Loan Debt with a Debt Management Plan

Following a budgetary analysis and negotiations with creditors, a debt management plan can be used to improve affordability. Rather than repaying the amount specified in the credit agreement, it is possible to get out of payday loan debt at an affordable rate. Once again, this debt relief program will only be suitable if the lender is prepared to freeze further interest and charges. The lower monthly repayment schedule means that it will take longer to clear debt. The management fee is 15%.

How to Get Out of Payday Loan Debt

It is possible to utilise a debt relief program or perform payday loan debt consolidation to alleviate money worries, stress and anxiety. However, it is important to seek advice and guidance from a credit counseling service to make sure that the right option is chosen from the outset.

Credit Counseling Can Be a Valuable Tool

But is it for You?

If you are in debt, and who isn’t, you may find that at some point in time you would benefit from the services of one of the many credit counseling agencies that abound in every city and state. The fact of the matter is that we are a nation of debtors for the most part and many of us find that we are slaves to interest rates. The beauty of working with a legitimate credit counseling service is that they will contact your creditors on your behalf and negotiate a lower interest rate for your debts.

It is important to keep in mind that while many may charge a nominal fee for their services; most of them earn the bulk of their money in fees (much like commissions) earned from the creditors they are working with. In other words, the creditors are the ones actually paying for their services. That being said, credit counseling is a great way to lower your total payments as well as your monthly payments. One thing that many people find helpful (and completely worth the fees) about credit counseling is the fact that this service doesn’t require a lot of time running around, mailing and emailing, or waiting on hold with your creditors. The service does this for you and since time is money, most people feel that this service alone is worth any fees they may charge.

Credit counseling isn’t for everyone however. This is primarily for people who have large amounts of credit card debt. If your bills are primarily student loans or medical bills, then credit counseling won’t really be able to offer much in the way of assistance. However, if you have high credit card debt, they can work to get the interest rates lowered considerably. Over time paying a lower interest rate can save a huge chunk of change.

Some credit counseling companies will even work things out so that you write one check to them each and every month and they handle the payments to your creditors. This works very well for many people who have trouble remembering to mail 5 or ten payments each month or prefer writing one check for easier record keeping. This also helps to insure that your payments are made on time each month. Creating a history of on time payments over time will go a long way towards drastically improving your credit score.

There are some drawbacks for this type of service. First of all, the accounts that you register will most likely be closed so you can no longer charge these items. You are also not allowed to open new charge accounts while you are using this service. Credit counseling is a valuable service, particularly in today’s economy but there is a price to pay for saving your credit. You must be committed to the credit counseling program and willing to do what is necessary in order to eliminate your debt, while establishing responsible spending habits. Establishing good habits of responsible spending while in credit counseling can help you keep your debt manageable for the rest of your life.