When your bills and emergency expenses pile up, it can be hard to resist the temptation of payday loans. Although these loans can be a helpful remedy for tough times, they also have the potential to trap you in overwhelming debt.
Thankfully, there are tons of ways to help you get back on track financially. Keep on reading to find out tips on how to pay off multiple payday loans.
What Is a Payday Loan?
A payday loan, as the name implies, serves as a short-term financial bridge until your next paycheck. These short-term and unsecured loans typically come with high interest rates and fees so although they can provide fast access to cash, they can also trap borrowers in a cycle of debt.
Despite the risks involved, a lot of people still turn to payday loans to make ends meet, with some even getting multiple loans from different lenders without realising the dangerous cycle they’re entering.
7 Tips To Pay Off Multiple Payday Loans
Explore these practical tips below on how to pay off multiple payday loans.
Assess Your Loan Situation
- List all outstanding payday loans
To start with, make a list of all your outstanding payday loans. Include information like the name of the lender, your loan amount, interest rate, and monthly due date.
- Determine the total amount owed for each, including APR
Once you have a list of all your outstanding payday loans, take a closer look at its specific details. This is the time to get your calculator out. Using the APR, determine the total amount you owe for each loan.
Create A Budget
Track your income and expenses
Start by listing all of your sources of income for each month. Include your paycheck, allowances, or income from side hustles and freelance work. Then, write down all your expenses such as bills, groceries, and entertainment. This may seem overwhelming, but it’s essential to help you understand your finances better.
Allocate a portion of your income for loan repayment
Now that you have a clear picture of your finances, allocate a portion of your income towards your payday loan repayment. The amount should be enough to cover the minimum payments for each loan.
Reduce Your Expenses
Cut back on non-essential spending
Chances are, there are some aspects of your monthly budget that you can minimise. For example, if you’re always dining out, maybe you can try cooking at home to save more money. Alternatively, if you’re paying for multiple subscriptions that you don’t use constantly, you can cancel them. Doing this will free up extra money that you can put towards your loan repayment.
Look for supermarket sales and discounts to help you save money, or take advantage of ongoing promos and vouchers. When grocery shopping, you can also consider buying generic brands instead of name brands.
Prioritise Paying High-Interest Loans
Focus on paying off loans with the highest APR first
Go back to your list of outstanding payday loans and prioritise paying off the loans with the highest APR first. If possible, try to make more than the minimum payment each month to help reduce the interest charges even further.
Make minimum payments on other loans
Although you’re focusing on paying off the high-interest loans, you should still make minimum payments on your other loans. When you miss payments, it can make way for expensive late fees.
Negotiate With Lenders
Explain your situation
Be honest with your lenders and tell them you’re struggling to make payments due to your situation. This proves that you are willing to work with them to find a solution.
Ask for an extension
Many lenders will work with you to set up another payment plan or extend your loan term to make your payments more manageable.
Increase Your Income
Explore part-time work or side gigs
New work opportunities could include freelancing, an entirely new job, or simply picking up extra shifts at your current workplace. Aside from helping you pay off your loans faster, it can also improve your overall financial situation.
Another way to increase your income and pay off your payday loans is by selling stuff that you no longer use such as old furniture or clothing. You can easily post these items on online marketplaces. You can also consider turning your hobby into a side hustle, such as selling artwork or baked goods.
Keep a record of payments made and balances owed
Following this tip will enable you to track your progress. More importantly, it will ensure that you won’t be missing any payments.
Set Up Automatic Payments
Automatic payments are the ultimate solution to avoiding late fees or missing payments. Many lenders offer automatic payment options, so be sure to ask if this is available. If this isn’t possible, set reminders on your phone.
How Can A Debt Consolidation Loan Help You?
A debt consolidation loan can be a useful solution on how to pay off multiple payday loans. We’ve compiled some of its advantages below.
Discover more about the debt consolidation plan in Singapore.
Applying for a debt consolidation loan is a simple process. You’ll typically need to provide basic information about yourself and your outstanding debts. Once it is approved, the lender will pay off your payday loans. Then, you’ll have only one loan to worry about.
Lower Interest Rates
Debt consolidation loans mostly come with lower interest rates compared to payday loans. This means you’ll end up paying less in interest and more towards paying off the actual loan.
Extended Repayment Terms
Another advantage of debt consolidation loans is longer repayment terms. This means you will have more time to pay off your debts, and you can enjoy lower monthly payments to ease your financial burden.
Worrying about multiple due dates and keeping track of multiple payments can be overwhelming and extremely stressful. Debt consolidation loans simplify your payments by combining all of your loans into one. This way, it will be easier to manage.
Commit to Taking Back Your Financial Freedom
With a plan in place, you can finally free yourself from multiple payday loans. It’s challenging but as long as you apply the tips listed above on how to pay off multiple payday loans, you will eventually be debt-free.
Thinking of consolidating your debt? Find out how you can do so with a personal loan.