Payday loans are unsecured. They have considerably high rates of interest as compared to secured short term loans. Payday loans have shorter repayment terms as well. One must apply for such loans only when absolutely necessary. Due deliberation should be indulged in before signing up to assess the affordability to repay and to do so on time. Any delay can be costly for a borrower. The late payment fines and penalties upon default are quite steep. It is not always possible to preempt every financial adversity and some borrowers may struggle to repay such loans within the stipulated repayment term. It is imperative for such borrowers to be proactive to manage their loans so they do not spiral out of control.
-> The first piece of debt advice is about avoiding defaulting on payday loans. Unlike some traditional loans, there is no grace period for any installment that is due. Lenders will levy a late payment fine even if a borrower manages to pay an installment a day after the scheduled date. Defaulting can be avoided by saving more money than usual. Many borrowers tend to repay the installment every month and move on with other expenses, without really thinking about the impending liability in another thirty days. The pragmatic borrower saves more money so a part of the next installment is already taken care of. This is a relatively surefire tactic to create a small pool of funds that can be used to keep repaying an unsecured loan.
-> The second piece of debt advice pertains to a situation, wherein a borrower is going to default and there is nothing that can be done. If you are certain that you will fail to repay the loan or you will miss an installment, then it is better to be proactive and you should speak with the lender. Private lenders have the ability to restructure a loan. This restructuring may be extending the repayment term. Lenders have the discretion to renew the term in a manner that reduces the monthly liability. Extending the term without changing the rate of interest will naturally bring down the monthly installment. There will be more interest to pay due to the increase in number of months you will have to bear the installments. The overall increase in the financial liability shall be nominal, as compared to the reduction of the installment. A substantially reduced installment may be more bearable.
-> The third piece of debt advice is about something you should not do. You must not apply for another loan to repay an existing loan. This may seem to be a practical solution for many and several lenders also put forth the same suggestion. Repaying one loan with a new one can become the beginning of a vicious cycle of debt. You must be in firm control of your finances to repay one loan and only then you should consider another, if at all you need it. Taking up multiple loans at the same time can wreak havoc on your credit score if you cannot repay them on time.