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Four Strategies to Pay Off Expensive Loans

Four Strategies to Pay Off Expensive Loans

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UpdatedMay 22, 2024
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    5 min read
Key Takeaways:
  • 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.

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 resource Mortgages in Trouble page. To learn more about student loan consolidation, see How Do I Consolidate My Student Loans?.

If you are struggling with a mixture of loans, use the Debt Coach 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 debt relief provider.

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 Debt Relief Savings Center.

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 refinance center.

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 resource Collection Laws and Exemptions By State.

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. also offers more information on the Payday Loan Information page, and has answered reader questions about payday loans in California, Massachusetts, New York, Florida, Texas, Illinois, and Virginia.

If you do not repay a payday loan, the payday loan company has several legal remedies, including wage garnishment, levy, and lien. See the resource Collections Advice 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. can help you learn if can avoid bankruptcy, if you qualify for bankruptcy, and what form is best suited for your needs. See the bankruptcy page to learn more.


Read the article Debt Negotiation and Settlement Advice to learn more about tactics and strategies for dealing with creditors. See also the free Financial Planning and Budget Guide, which can help you manage your finances and you can learn about budgeting and prudent financial management.

Debt statistics

Mortgages, credit cards, student loans, personal loans, and auto loans are common types of debts. According to the NY Federal Reserve total household debt as of Q1 2024 was $17.69 trillion. Housing debt totaled $12.82 trillion and non-housing debt was $4.88 trillion.

According to data gathered by from a sample of credit reports, about 26% of people in the US have some kind of debt in collections. The median debt in collections is $1,739. Student loans and auto loans are common types of debt. Of people holding student debt, approximately 8% had student loans in collections. The national Auto/Retail debt delinquency rate was 4%.

Collection and delinquency rates vary by state. For example, in Nebraska, 16% have student loan debt. Of those holding student loan debt, 5% are in default. Auto/retail loan delinquency rate is 2%.

Avoiding collections isn’t always possible. A sudden loss of employment, death in the family, or sickness can lead to financial hardship. Fortunately, there are many ways to deal with debt including an aggressive payment plan, debt consolidation loan, or a negotiated settlement.



PPamela, Jan, 2020

See if can help paid off all loan and auto car?

DDaniel Cohen, Jan, 2020

What kind of help are you seeking, exactly, Pamela?

AAnonymous, Jun, 2019

Celina Loan Firm said they could help me get a $100,000 business loan. All I got was ripped off.

DDaniel Cohen, Jul, 2019

Thanks for sharing that information. Amazing how many scam artits are out there with false promises of a forthcoming loan. Good reminder that you should NEVER pay a fee in advance for a loan.

AAnonymous, May, 2019

Watch out for Greener Loans Worldwide. They tried to scam me.

CClaudia, Jun, 2013
I noticed you did not include Consumer Credit Counseling Service (CCCS) in your discussion of loan resolution options. What's wrong with CCCS?
BBill, Jun, 2013
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 Debt Coach online tool to learn more about the costs and benefits of all debt resolution options.
LLiz, Aug, 2012
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.
BBill, Aug, 2012
Use the free Debt Coach tool, to find the best solution for your situation.