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Debt relief options for too many payday loans

[Dec 10, 2010.]


Relying on occasional payday loans for an emergency can be a red flag that you need to curtail your spending and develop a savings plan. Borrowers with too many payday loans or payday advance loans that they cannot repay are in more serious trouble and should consider consulting with a credit counselor or working with a debt settlement or debt consolidation program.

Consumers who are trying to get out of debt may find themselves bombarded with offers of debt relief from a variety of companies and it can be difficult to decipher which ones are legitimate and which ones are scams.

Options for debt relief

  1. Make a plan to reduce debt and pay off your credit cards and payday loans one by one until you are debt-free.

  2. Contact your credit card company. Ask if you can negotiate a modified repayment plan.

  3. Consult a non-profit credit counselor. A counselor can discuss your finances and help you develop a budget, usually for free. Some counselors offer workshops while others provide free one-on-one counseling. Look for one at the National Foundation for Credit Counseling.

  4. Apply for a debt consolidation loan. A debt consolidation loan will wrap all your debts into one loan, usually at a lower interest rate and a lower monthly payment. Be careful to add up all your debts and payments before agreeing to a debt consolidation loan to make sure the payments will be lower and that you will be able to afford them.

  5. Sign up for a debt management program. A credit counselor may recommend a debt management program so that you make one monthly payment to the program and all your debts are paid from that account. You will not be allowed access to any new credit until your debt is repaid.

  6. Try a debt settlement program. The Federal Trade Commission (FTC) warns that many debt settlement companies promise more than they can deliver and can cause further financial problems rather than the debt relief you seek. However, if you carefully research the company and get information on the fees and terms of the settlement agreement and the expected length of time it will take to work out arrangements with your creditors, debt settlement might be a good option. Don't work with a company that charges you fees before your debts are settled or promises to make your debt disappear.

  7. Bankruptcy. Declaring bankruptcy should always be a last resort and it will seriously damage your credit, but for some people this is the best option.

Regardless of which route you take for debt relief, ending your reliance on debt and building a solid financial foundation with savings should be the result.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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