Debt management plans: Nonprofit credit counseling agencies like InCharge also offer a service, at a monthly fee, to reduce credit card debt through debt management plans. The creditor offers a lower interest rate to the agency, and you can agree whether to accept it. The agency pays the creditors, and you make one monthly payment to the agency, which frees up money so you can pay your bills and reduce the debt. The plan pays off the debt in 3-5 years.
Debt Settlement: If trying to keep pace with unsecured debt (credit cards, hospital bills, personal loans) is the reason you’re always out of money, you could choose debt settlement as a debt-relief option. Debt settlement means negotiating to pay less than what you owe, but it comes with a major stain on your credit report and heavy price on your credit score.
Local charities and churches: If you have hit a bump in the road, there are a surprising number of charities and churches willing to lend assistance at no cost. Organizations like United Way, Salvation Army and church-sponsored ministries like the St. Vincent de Paul Society often step in when all you need is a few hundred dollars to get through a tough stretch.
Community banks and credit unions: The regulations allow local banks and credit unions to make smaller loans on easier repayment terms than the large regional or national banks do. Call or visit to compare interest rates, which could be as low as 10%-12% as compared to 400%-500% rates on payday loans.
The interest rates could be close to 35% than the 6% rate those with great credit receive, but 35% is still a lot better than the 391% from a payday lender.
Payday Loans Target Military, Low-Income
Payday lenders prey on people in desperate economic situations Tennessee payday loans Bradford TN, meaning low-income, minority families, members of the military and anyone else who has limited credit options.
The CFPB estimates that 80% of payday loans get rolled over and 20% end up in default, which goes on your credit report for seven years and all but eliminates you from getting loans in the near future.
Another penalty consumers often incur from payday loans is nonsufficient funds (bounced-check) charges from you bank. If you don’t have the money in your account when the payday lender tries to cash the post-dated check you wrote or takes the money out by direct deposit, most banks charge a $25-$35 penalty.
There also is long-term damage to your credit score
Default also opens you up to harassment from debt collection agencies, who either buy the loan from the payday lender or are hired to collect it. Either way, you can expect the phone to ring until you pay.
Though some payday lenders don’t report directly to the three major credit reporting bureaus in the United States, most report to the minor agencies. If the debt goes to a collection agency, that agency almost always reports non-payment to the major credit bureaus, which ruins your credit.
Borrowers either post-date a personal check to coincide with their next paycheck or allow the lender to automatically withdraw the money from their account.
Credit Counseling: Nonprofit credit counseling agencies like InCharge Debt Solutions offer free advice on how to set up an affordable monthly budget and chip away at debt. InCharge credit counselors can direct you to places in your area that offer assistance with food, clothing, rent and utility bills to help people get through a financial crisis.