Student loan reimbursement check is supposed to arrive in the next few months, but you have to pay rent for a new apartment. You had already exhausted your emergency savings when your car broke down a few months ago. You have also applied for a second job. Unfortunately, the only available jobs are during the weekend hours. But you are already working during that time. So what’s the way out?
In a state of panic, you apply for a credit card. But the credit card company rejects your application due to your low credit score. Next, you approach a bank for a personal loan. The bank is ready to give you one. But the minimum loan amount is $3000, which is way more than what you want to take on. Plus, you have a student loan already.
You simply don’t have money. But you need a little amount of money to get by. So you apply for a payday loan and pay your rent. You are relaxed for the next few days and sleep peacefully at night. But the problem starts after 14 days when you have to pay off the payday loan along with interest and fees.
You don’t have money to pay such high-interest rates. But the lenders are not ready to listen to you, and they want money. So what can you do now? Let’s discuss your available options.
How college students can get out of payday loan debt
- Calculate how much you owe – How many payday loans do you have, and how much do you owe? These are pertinent questions, and you need to find the answers. Go through your loan documents to find the lenders charging the highest interest rates. Make a plan to get rid of these debts first. The sooner you get out of these debts, the more money you will save in the long run.
- Attend a free credit counseling session – As a student, it’s tough to navigate debt problems without proper guidance. And the best place to get the right direction is a credit counseling agency.
Certified credit counselors can suggest payday loan solutions to you. Since they are well aware of the state payday loan laws, they can even tell you if your lender is licensed in the state.
If the lender is not licensed in the state, you have the right to pay only the principal amount. Lenders may ask you to pay interest on the loan. But you can reject it.
- Consolidate your payday loans – If you want to reduce stress and interest rates, you need to know how to consolidate payday loans. A payday loan consolidation has significant benefits. It helps you merge all your cash advance loans into a single monthly payment plan at an affordable interest rate. This enables you to save money in the long run.
As a student, you have to take care of so many expenses – food, lodging, tuition fees, etc. A payday loan puts additional pressure on you.
You can reduce this pressure through payday loan consolidation. You don’t even have to worry about late fees and fines. But make sure you are consistent with your payments. Otherwise, your consolidation plan will be terminated.
- Opt for Extended Payment Plan – If your lender is a member of the Community Financial Services Association of America, you can ask them to offer you an Extended Payment Plan. If you are approved, you’ll get a chance to pay off the debt in 4 equal installments. You will get four weeks to repay the loan. There are no prepayment penalties or fees. However, if you miss a payment, lenders may charge extra fees. Read the new agreement carefully to understand the terms and conditions properly.
- Settle your payday loans – Inform payday loan companies that you can’t pay the total amount. You are a college student. You don’t have so much money to pay such a massive amount. Negotiate for a lower payoff amount. Payday loan companies may not accept your initial settlement offer. Don’t lose hope and make a counter-settlement offer. They may forgive a portion of your debt when they understand that you really don’t have money to pay off the debt.
Note: Before you opt for any debt relief option, make sure you close your bank account. Unless you revoke ACH authorization with the lender or close your bank account, payday loan providers will continue to take money from it.
The bottom line
As a college student, it’s best to avoid payday loans even when you are in financial trouble. Payday loans don’t solve your problems. Instead, they would aggravate your problems.
If you need money, take out a personal loan from a friend or family member. You can also work as a freelancer to boost your income without dropping your classes.
SEE ALSO: How College Students can Save Money