For any of us, the need to access cash quickly can pop up without warning. Often we have no time to go through the normal loan application process, and when poor credit ratings are a factor to consider, there is one option that provides at least some certainty. Getting a payday loan with bad credit is possible for practically anyone.
There are problems with this route, however. The promise of fast access to cash means lenders providing these loans are able to charge much higher interest rates than normal, some as high as 35%. So, while approval for emergency funds is almost assured, a hefty repayment sum is equally certain.
What is more, the repayment term is usually very short, in some cases as short as 14 days. It depends firstly on the terms of the payday loan, and secondly when the next paycheck is due to arrive (thus the loan name).
Avoiding a financial disaster can be tricky if the right attitude is not applied from the start, so here is a brief guide to taking control of the debt that can so easily build up.
Organize Your Budget
Most of the time, borrowers will only have one payday loan, with bad credit making it difficult to take on any more. But when the sum borrowed is high, the repayment schedule is usually stretched over three or more months. This can create a need for further loans, which then overlap to increase the repayment pressure.
It is important to make a careful study of the situation, and to accurately budget the repayments. Identify each loan and when repayments are due, as well as how much the repayments are. Draw up a timetable if necessary for easy reference. A major flaw amongst borrowers is that, after getting approval for emergency funds, they do not stay on top of the situation.
Once the timetable is clear, allocate the necessary amounts to pay off the payday loans. It may need some serious sacrifices to pull off, so maybe wait a while before booking that vacation to Florida.
Consider Debt Consolidation
If the debt is too difficult to manage, then there are a number of debt consolidation loan programs that can be considered. These ultimately clear in one go all of the troublesome payday loan, with bad credit often ignored by lenders. These programs are designed to help, primarily.
A debt consolidation program means that the debt is fully repaid using another loan that is structured to have much lower monthly repayments over a longer period. When a borrower gets approval for emergency funds, they rarely have the luxury of choosing the loan deal, but this sets the issue right.
There are also debt settlement programs available. These differ from consolidation programs in that they are used to clear perhaps 50% of the debt in one go. This makes a difference in terms of repayment sums, but part of the payday loan debt remains.
The final option for clearing payday loans with bad credit is bankruptcy, and while this is not the most desirable solution, sometimes it is necessary. This option is reserved only for those borrowers who are clearly unable to meet repayments and are completely overwhelmed by the debt.
This means that the debt is erased, relieving the borrower of any need to repay the loans. But there are consequences to be aware of before finally lifting the pressure that approval for emergency funds brought.
Once the application for bankruptcy is approved, the chances of getting another payday loan (or any loan) approved can be rated as slim to nil for about 2 years.