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Four Strategies to Pay Off Expensive Loans

Drowning in debt? Find out your debt relief options and become debt free.

Highlights

  • Pay off payday loans as quickly as possible, since they are expensive debt.
  • If you own a home, consider refinancing to pay off high-cost loans.
  • Debt resolution or negotiation may be beneficial, if you can't keep up with your payments.
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Help to Pay Off Payday & Credit Card & All Loans.

Too many high-interest loans burn a hole straight through a household's budget. Smart consumers find ways to pay off high-interest loans (such as payday loans) as quickly as possible, and consolidate any remaining loans for convenience, cost savings, and improving their credit profile.

This article explores consolidation options for paying off loans. This article assumes the consumer struggles with one or more payday loans. You may have payday loans or other unsecured debts — the debt resolution techniques described here are the same for almost any unsecured debt. Which option works best for you depends on your situation.

If you struggle with a mortgage, see the Bills.com resource page. To learn more about student loan consolidation, see .

If you are struggling with a mixture of loans, use the Bills.com to learn the best tactics for resolving your debts.

Payday Loans

Payday loans, also called “cash advance loans”, “check advance loans”, or “deferred deposit check loans”, are a frequent pitfall for consumers. Payday loans should be an option of last resort, because of their tremendous expense. Fees range from $15 to $30 per $100 borrowed. The average loan totals $300. With rates so high and the term of the loan so short, it's no wonder that a very high percentage of these loans are rolled over by the borrower again and again so that the accumulated fees equal an effective annualized interest rate of 390% to 780% APR.

Quick tip #1:

Get a no-cost, no obligation analysis of your debt options from a pre-screened .

Option 1: Debt Settlement

If you struggle to pay your debts, you may want to consult with a professional debt settlement or consumer credit counseling firm to discuss the options available to you. For a no-cost, no-gimmick debt consultation with one of Bill’s approved debt help partners, visit the .

Option 2: Cash-Out Refinance

Another effective method to pay off high-interest loans is to consolidate your loans through a refinance loan, where you pay off all existing loans and roll them into one larger but much cheaper new loan, typically a mortgage. Read about refinance loans as forms of paying off other loans at our .

Option 3: Payday Payment Plan

You can free yourself from a payday loan trap if you reside in one of the 12 states where payday loans are illegal once the effective rate passes the usury cap in that state. Usury laws dictate the maximum interest that many lenders may legally charge. If the payday lenders follow their normal business model the loan will most assuredly pass the limit very early. New York State even has a criminal statute that sanctions the lender if the rate exceeds 25%. If you are in one of those states, the loan may be void, and you may be only liable for the principal amount borrowed. In addition, there are eight states whose payday loan regulating statutes require lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Such a repayment plan may help you pay off these loans.

To learn more about debt collection laws in your state, see the Bills.com resource .

If you do not live in one of the states whose payday loan regulations favor consumers, the best solution would be for you to borrow the funds needed to repay these loans from a conventional lender or a family member or friend. Converting your payday loans to a conventional loan should allow you to repay the loans within a reasonable time frame and at a reasonable interest rate. If you cannot borrow the funds to repay the payday loans, you may want to make a payment each month to pay down the balances. In some states, the interest on the loans will prevent you from effectively repaying the debts in monthly installments; if you find that to be the case, you should contact the payday lender to try to work out repayment terms that will work with your budget. Hopefully, one of these options will work out for you so these loans do not go into default.

Bills.com also offers more information on the page, and has answered reader questions about payday loans in , , , , , , and .

If you do not repay a payday loan, the payday loan company has several legal remedies, including wage garnishment, levy, and lien. See the Bills.com resource to learn more about the rights of creditors and debtors.

Option 4: Bankruptcy

Although it is now more difficult to qualify for a Chapter 7 and more people are required to enter into repayment plans, bankruptcy is still available to most people in need of its protection. Several types of bankruptcy are available, depending on your assets, income, and financial situation. Bills.com can help you learn if can avoid bankruptcy, if you qualify for bankruptcy, and what form is best suited for your needs. See the Bills.com page to learn more.

Summary

Read the Bills.com article to learn more about tactics and strategies for dealing with creditors. See also the free Bills.com , which can help you manage your finances and you can learn about budgeting and prudent financial management.

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22 Comments

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  • CS
    Jun, 2013
    Claudia
    I noticed you did not include Consumer Credit Counseling Service (CCCS) in your discussion of loan resolution options. What's wrong with CCCS?
    0 Votes

    • BA
      Jun, 2013
      Bill
      Nothing is wrong with CCCS. Typically, consumers choose CCCS if they are overwhelmed by credit card debt, but a CCCS debt management plan might help with different types of unsecured debts, including some personal loans. Follow the hyperlink I just mentioned or use the Bills.com Debt Coach online tool to learn more about the costs and benefits of all debt resolution options.
      0 Votes

  • LD
    Aug, 2012
    Liz
    There are four options given to solve or to easily pay off an existing payday loan, however I am confused of which of the four options do fit for me. Aside from a payday loan problem I also have a bad credit.
    1 Votes

    • BA
      Aug, 2012
      Bill
      Use the free Debt Coach tool, to find the best solution for your situation.
      0 Votes

  • JA
    Jul, 2012
    Joe
    I have a old debt where I used my vehicle as collateral to secure a loan of I think $300. Now there's a lien on my title and I want to remove the lien. It's been close to or over 10 years since getting the loan.
    1 Votes

    • BA
      Jul, 2012
      Bill
      For real property (land or a building affixed to land), once a lien is recorded, it remains in the chain of title. It will take a court order to remove the lien. An order might be a notice of satisfaction, which is the result of the judgment-debtor paying the amount of the judgment to the judgment creditor. Or, an order might be the judgment-debtor convincing the court the lien is in error, or no longer applies due to the judgment lapsing. Consult with a lawyer who has real property experience in your state to learn the proper procedure to follow to ask a court to order the lien removed. This should not be an expensive process, and should require an hour or two of a paralegal's time to complete the pleading.

      You mentioned a vehicle. A lien on a title does not have a statute of limitations in all states I am aware of. As in real property, you need to either ask the lienholder to release the title, or convince a state court to order your DMV to do so. Consult with your state's Web site to find a form you can send to your lienholder to release the title.
      0 Votes

  • BS
    May, 2012
    Brittany
    I pawned my car title two years ago then lost my job and coundn't it with all the fees so I didnt go back then forgot all about it. Am wanting to get ride of my car but I cant without a cleared title. Called the title place and they stated payoff amount is 1096.00 on a 600.00 loan. Should I pay it all or asked for a lower payoff amount? Or is there a way not to pay at all since it's so old?
    0 Votes

    • BA
      May, 2012
      Bill
      No harm in trying to negotiate a settlement for less than the full amount due. I do not see a statute of limitations issue here.
      0 Votes

  • JP
    Jan, 2012
    Jonathan
    Are you guys familiar with social loans like Prosper or Lending Club? Can I get one of those loans if my finances aren't perfect?
    0 Votes

    • BA
      Jan, 2012
      Bill
      These firms provide a good option for people with solid (e.g. 640+) credit who are employed and need to borrow no more than $25-35,000. See their sites for full details.
      0 Votes

    • PL
      Jun, 2013
      Peer
      Great question. There are companies out there to help investors get connected to the Peer to Peer Lending market.
      0 Votes