7 Simple Ways to Repay a Payday Loan Fast (These Really Work)

Woman paying off pay day loan

A pay day loan is not a long term financial solution, and should be paid off by the first due date.

A payday loan is often a valuable resource for people from all socioeconomic groups. Anyone can get behind and need some emergency cash, and there are multiple installment loans, online personal loans, pay day loans and other types of loans to help your family get the cash it needs. However, any payday loan can cause people to get trapped in cycles of debt because of their higher interest rates. These payday loans for bad credit aren’t meant for long-term financing, but some people struggle to repay their loans even though they’re usually for small amounts.

Getting out of Payday Loan Obligations with Seven Smart Strategies

Payday loan obligations–while usually small–are often difficult for some people to repay because the entire loan balance is usually due in a lump sum. Families who are already experiencing a shortage of cash might have trouble repaying their lump-sum loan from a single paycheck. Unfortunately, rolling over these loans or getting another payday advance loan to cover the previous loan is a bad strategy. Short-term loans carry high rates of interest because of higher default rates and shorter repayment periods that generate only small amounts of interest for the lender.

This situation results in some families getting caught in debt, borrowing more to cover their loans and generating even more debt for the next cycle. That’s why repaying your loan is critical if you want to avoid these consequences. These seven tips could help you repay your payday loan quickly:

1. Automate Your Payments for Loans and Other Expenses

Automated payments can prevent you from making big mistakes when you have bills due. It’s harder to spend money that you don’t have, so scheduling automatic payments for rent, utilities, loan payments, cable bills and phone bills makes it easier to pay your debts. It’s important not to take on more debt just to put off an impending financial crisis. Writing a bouncing check or not paying your other obligations could result in higher fees and charges than the interest rate on a short-term loan.

2. Reduce Your Ongoing Expenses

It’s astonishing how much money the average family wastes on little indulgences such as fancy coffee beverages, eating out with friends at lunch, buying takeout for dinner and partying on the weekend. You can brown-bag your lunch for a while, cut unnecessary entertainment expenses and avoid new purchases for items that you don’t desperately need. These savings alone could cover your loan balance or make it easier to manage when it comes due.

Medium-cost necessities for most families include phone plans, car loan payments, cable costs, insurance coverage and Internet service. Savings strategies might be to relinquish a second car, get a cheaper vehicle, reduce your service plans or increase your insurance deductible. Small expenses that are easy to reduce or eliminate, according to thesimpledollar.com, include:

  • Switch to a pay-as-you-go phone.
  • Get rid of things that you don’t need, and sell them on eBay or at a yard sale.
  • Walk occasionally instead of taking a cab or driving.
  • Host a potluck dinner for your friends instead of an expensive dinner or night on the town.
  • Use refillable water bottles instead of buying bottled water.
  • Clip or download coupons on your phone, and use them.
  • Buy food and necessities from bulk stores, discount grocers or the cheapest store in your neighborhood.
  • When feasible, make twice as much food and freeze half for another meal.
  • Become energy-conscious, and turn off lights, devices and appliances when they’re not being used.
  • Use the library to borrow books and videos instead of buying them.
  • Make shopping lists, and stick to them unless there are unexpected, exceptional bargains.
  • Replace expensive snacks with popcorn that you make at home.
  • Carpool to work.
  • Request a reduction in your credit card interest rate.
  • Install a programmable thermostat to reduce ongoing energy costs.
  • Lower the heat on your water-heater thermostat.
  • Cancel any club memberships that you don’t use or need.
  • Read your local newspaper and national magazines online instead of paying for them.
  • Eliminate paid services that duplicate entertainment options such as Hulu, Netflix, Amazon and other paid subscription services.

3. Transfer the Balance on Your Credit Card

Introductory offers on credit cards often are as low as 0-percent on transferred balances. Transferring a large balance could save you a considerable amount of cash and reduce your monthly minimum payment. The extra cash could raise your monthly income enough that you could easily afford to retire your payday loan directly or negotiate a longer repayment period.

4. Access Your Retirement Account at Work

If you have a looming debt that creates a financial hardship, you might be able to get a 401(k) loan, which is a better option than pawning your valuables. These loans usually have to be repaid within five years, and you can borrow up to $50,000 or half the amount in your account according to an article in investopedia.com. This option offers flexibility, convenience, speed and economy for your short-term liquidity needs.

You can also withdraw cash from your IRA, but if you aren’t at least 59.5 years old, you’ll have to pay a penalty. The income will be taxed if you haven’t already paid taxes on a traditional IRA. However, the taxes are already paid in Roth IRAs, so you wouldn’t have to pay that expense if you borrowed from your Roth IRA. You can also convert your traditional IRA into a Roth IRA. Your have some time to make the conversion, so you could borrow money from the balance and repay it so that there’s no penalty for using the funds.

Another savvy option for older homeowners who need to raise cash to pay debts is to consider a reverse mortgage. Your property’s equity can be converted to cash in monthly payments to you while you still live in your home. You can also receive the money upfront as a line of credit.

5. Explore Other Options to Consolidate Your Debt and Retire a Payday Loan

The more proactive you are, the quicker you can retire your payday loan debt. Credit.com reports that if you borrowed from a lender that’s a member of the Consumer Financial Services Association, you can request an Extended Payment Plan. If granted, this will extend the time for repaying your debt.

The CFSA represents about 9,000 storefront payday lenders and many online lenders that offer loans for poor credit online. These members are often willing to work with borrowers to negotiate a new repayment deal. Pewtrusts.org reports that many borrowers fail to cut expenses or seek other repayment options, which often traps them in debt. These borrowers end up overdrafting their bank accounts or seeking help from friends and family anyway. It’s better to seek these alternatives for financing before you get trapped in debt.

Options for consolidating loan debt include:

  • Applying for an alternative loan such as an installment loan or peer-to-peer lending
  • Borrowing against collateral such as your car, boat, business or other valuable property
  • Pawning valuables to repay small-dollar short-term loans
  • Researching community organizations that offer emergency loans
  • Landing an installment loan
  • Refinancing student loans
  • Borrowing from credit unions, faith-based lenders and military relief

6. Taking on Extra Work to Earn Cash

Most people have several opportunities each month to cover a friend’s shift at work or put in a few hours of overtime. The extra cash could easily cover a small loan. Other options include taking a part-time job, working as a neighborhood handy person, babysitting and working over the Internet at many types of jobs that allow people to earn extra cash. Some people actually earn hundreds of dollars per month by selling much-needed blood plasma. You might also check with your local temp service to see if there are any available part-time jobs requiring your skills.

7. Consulting with a Reputable Credit Counselor

Credit counseling agencies can help you set up a budget and negotiate a settlement with your creditors. Consumerftc.gov recommends choosing a credit counseling organization carefully.

The organization should be willing to help you create a budget, and its staff counselors should be trained and certified in consumer credit and debt management. Counselors should take a holistic approach to develop a personalized plan based on your financial situation. If you have a problem with your credit counseling agency or can’t resolve your loan debt because you think either party is unreasonable, you might get help from your state’s banking and securities regulators.

Loans for Poor Credit Create Repayment Challenges

Loans for poor credit typically have higher default rates, so companies that lend to these clients usually charge higher interest rates–especially for a short-term payday loan where the lender only earns interest for one week up to a month. Loans for poor credit serve an important niche in the financial world, but borrowers can get trapped in debt if they’re not careful. That’s why it’s so critical to repay your short-term loan and get that high-interest loan retired. The critical issue is to assess your ability to repay any loans for poor credit before you sign the contract.

It’s important to do your best to repay the loan. Don’t panic, but some states allow creditors to sue for legally-binding small-dollar loans. Banks can charge multiple overdraft fees if your creditor presents the debt multiple times for payment. If you can’t afford to pay your loan, try to cut your expenses and find some extra cash to cover the bill.

Bruce McClary of the National Foundation for Credit Counseling, according to a report at nerdwallet.com, commented, “If you have a valid, binding, legal agreement to pay that debt, and you’re in a state where they can sue you and attach your wages, you’re playing a game of chicken that you’re going to lose.” Loans for poor credit carry risks, so try to negotiate a settlement or find another way to pay off any short-term loan.

Online Pay Day Lenders Offer Loans at Higher Interest Rates

Online pay day lenders offer convenient loans that usually take less time for approval and include lenders who have trouble getting approved at traditional banks. However, these loans come at the cost of higher interest rates even if the loan is only for about two weeks. The problems occur when borrowers can’t repay their loans from their next scheduled payday. Families find themselves low on cash, and a payday loan can be a lifesaver in many circumstances. When it comes time to repay the loan, more expenses come due including the original loan and its interest charges.

Borrowers are faced with an even bigger cash shortage, and many take out another loan to cover the deficiency. The cycle can continue, which can trap borrowers in debt and turn the loan into a long-term debt where interest is charged at short-term rates. Online pay day lenders are so easily available that people often fail to plan their financial strategy before borrowing. However, if you find yourself in trouble with online pay day lenders, it’s easy to manage the situation with a little effort and perseverance. Here’s how:

  • Contact your online pay day lender—and the holders of other debts–and ask to make a payment arrangement.
  • The CFPB, or consumer Financial Protection Bureau–recommends contacting your lender and asking for an extended payment plan, or EPP, according to an article posted at magnifymoney.com]
  • Ask friends, family or your employer for a temporary loan–or even a cash gift–to get you through your financial predicament.
  • Put off any planned discretionary spending for vacation trips, entertaining, parties and other luxuries until you can get out of debt.
  • Find out if there are any religious or community-based groups who can help you by covering a rent or utility payment.
  • If you have a bill that’s higher than expected, don’t take it at face value. Research the charges and try to negotiate a lower fee.
  • In the worst-case scenario–depending on your finances and income–it might be necessary to consider bankruptcy, but this should be used as last resort because it can affect your credit rating and ability to get a job and qualify for home rentals for as long as 10 years.

It’s important to shop around when looking for an online pay day lender. You might qualify for an alternative loan, loan from a federal credit union, a credit card cash advance, installment loan or online personal loan at a lower interest rate.

Knowing more about loans, lending, budgeting and financing is always a good proactive strategy before taking on any kind of debt. If you do need a payday loan to cover an emergency or unexpected need for cash, shop around for the right lender, interest rate and repayment terms.