How To Comfortably Pay Down A Payday Loan

Posted on: 12 December 2014

Payday loans are fantastic for when you're in need of funds in a pinch. However, when you borrow much more than you normally are able to pay back, it can be overwhelming and you may find yourself stuck in a cycle of getting a payday loan and then paying it back only to turn around and get another payday loan. However, you can break this cycle and save getting a payday loan for actual emergencies, such as getting a vehicle repaired or fixing the plumbing in your home. Just follow these steps and you'll be on your way to a better relationship with your payday loan agency! 

Before Getting a Payday Loan

If you are contemplating getting a payday loan, think about how much money you truly need, and don't go over that amount, even if your payday loan agency offers you more.

For instance, let's say your washing machine breaks. If buying a used washing machine will cost you $200, and you have $50 left over from your previous paycheck, and your children offered to pitch $50 that they saved up selling lemonade. With $100 available to you, free of interest or fees, you should only request a payday loan for $100. There's no need to take out a payday loan for $500 just because you want to have some extra cash.

By borrowing only what you need, it will be easier to pay back what you borrowed, along with the fee your payday loan agency will likely charge. 

Once You Have a Large Payday Loan

If you find yourself borrowing the maximum amount of funds available--let's use $500 as an example--paying back about $573.35 (based on average fees around the country) may hurt your paycheck enough that you feel compelled to borrow the $500 again. This is how the cycle begins. 

Start truly paying the loan back a little at a time. When repayment day rolls around, pay the $573.35, then request $450 instead of $500. You just brought your principal down by $50 and saved yourself about $15 in fees by doing this. This means that, in total, you will have saved about $65 by simply requesting a little less money this time around.

When the following repayment day comes, pay the loan back, and then request $400 instead of $450. Continue this slow decent until you reach a small enough amount that you can pay the loan off without needing to borrow again.

Though it could take anywhere from a few weeks to a few months to get rid of a payday loan using this method, it will help you clear your balance at your payday loan agency sooner so that, when a true financial emergency arises, you will have a reserve of cash available for you to tap into as soon as possible. Always be cautious and responsible when using payday loans.