Payday loans and debt
While it is possible to live a life free of debt, most people will find the lure of low-interest credit cards and loans too much to turn down at some point or another. Often when you sign up for a new bank account, you will be offered a credit card with the account. With low interest rates and a relatively small amount of credit available on these cards, they can often seem a good idea to keep for emergencies. Similarly, a loan from your bank with low monthly repayment amounts that will allow you to afford a large purchase that you otherwise wouldn’t can seem an attractive proposition.
However, if your circumstances change, making you unable to meet repayments, or you misjudge the amount you have spent on your credit cards you could quickly find yourself in what seems like an inescapable debt cycle. It is also worth bearing in mind that aside from rent, tax and living expenses, things like mobile phone bills and unexpected utility bills can add to the amount you are expected to pay out monthly, leaving you struggling to make ends meet.
Quick fix payday loans
Short term payday loans can often seem like a quick fix to get you out of a spiraling debt trap, offering low amounts of instant cash to meet your repayments in the short term, and often offering what seems like a low fee to borrow the money (roughly $25 per $100 borrowed). But these loans also need to be paid off, and you are just adding to the debts you already have. If you could not afford to pay off the original repayments, you are unlikely going to be able to pay them off again the next month, especially with the cost of the loan thrown in. Once in this circumstance it is best to stop borrowing and draw up a debt-management plan to get yourself out of trouble.
Draw up a plan
Firstly, work out everything you owe. This will include rent and utilities, as well as your phone, internet and any loans and credit cards. Work out the exact cost of each repayment monthly, as well as the total amount owed in order to be sure of what exactly you need to be paying out.
Put your debts in order of importance. Food, shelter and taxes are the most important, so make sure you have added your rent and council tax into this, after these everything else can be ranked in order of which are the most urgent. Credit cards, any loans and gas and electricity bills are important, and will need to be paid, but are not as essential as basic living expenses so make sure these fall somewhere lower down on your list.
Following this, work out a budget which includes your most basic living expenses. This is food, travel, clothing and health essentials. Anything left over from this is your expendable cash and should be worked into a series of repayments for your creditors. Most companies will not penalise you as long as they know what is going on so contact all of your creditors to explain your situation and work out a plan with them. Only offer as much as you can afford so that you are able to stick to the plan you work out with each company, and you should be able to create a workable repayment plan for everyone.
Often it is a good idea to talk to your bank and see if you can get a large low-interest loan to consolidate your debts into one monthly payment, which will often work out much lower than what you have been paying, and also prevent you having to call around various companies if there is a further problem with your finances.
Finally, if you need some more tailored advice, there are a number of free institutions in the USA which can help you to get back on track. The Citizen’s Advice Bureau has various centers set up throughout the USA and will give you free and confidential advice. You might also want to try the Debt Advice Foundation (0800 043 40 50) or the National Debtline (0808 808 4000), which are again free services designed to give you advice specifically for your situation, helping you to solve your debt problems once and for all.