Payday Loan Question
August 5, 2009
Payday loans can bleed you dry. For example, here’s a recent comment from reader Cheryl:
“We started out with Payday Loans when we hit financial bottom when I lost my job. We had just moved with a larger mortgage, plus have 2 kids at home to feed.
We now have 6 Payday Loans that are killing us. I’m laying awake at night worrying. We pay one off and it seems something else comes up. Id go without food and eat cereal to pay them off, but I have 2 teenage boys who eat all the time and I even bulk cook and freeze things for them.
No junk food, pop etc. I home cook meals every night. It is such a hole to get in, and so frustrating when you cant get out. Our credit has hit rock bottom now.
We have considered bankruptcy since some of our other bills have suffered now also. Ive heard you can file against Payday loans, but where will I get the money to file?”
Cheryl, I don’t know how much your loans are for or what interest rate you’re paying on those loans but I do know that the rates on payday loans can be insanely high, higher than any credit card. As you’ve experienced, the interest accumulates so quickly that your payments go towards the interest, making the original loan difficult to pay off.
If some of the loans are bigger than others you could use Dave Ramsey’s Debt Snowball method of paying off the lowest balance loan first, then once it’s paid off apply the payments you were making towards the next highest balance. One possible way to raise money to pay off that first loan is to get together some of your personal belongings and sell them on eBay.
Of course from a pure numbers perspective, it would be good if you could consolidate all of those really high interest loans into one loan at a lower interest. However, you mention that your credit is bad so you may not be able to find a bank or credit card that will give you a line of credit.
Alternative sources of loans such as Lending Club are useful for some people but if your credit is really bad that won’t help much either. If you have family that’s willing and able to help out, you could look into borrowing money from them through Virgin Money USA.
Since it sounds like you’re struggling with paying a bigger mortgage without your job, I’d contact the National Foundation for Credit Counseling. The NFCC has credit counseling, home owners counseling, and bankruptcy counseling all of which may be of some assistance to your family. Good luck!
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