Escaping the Payday Loan Debt Cycle

: Chris Lee Law Firm

  Filed under: Loans

Payday loanMillions of Texans take out payday loans per year. Consequently, countless individuals become unintentionally trapped in an endless payday loan cycle. Payday loans can be especially difficult to escape for the numerous individuals who live paycheck-to-paycheck. If you ever wondered how to get out of a payday loan, there are additional figures along with suggestions that may help you end the vicious cycle.

Texas Payday Loans by the Numbers

Payday lending in Texas is a vast business, accounting for $5.8 billion in annual revenue. Because payday loans come at such a high cost (APRs averaging 200-500%), most of this money comes to the payday loan industry in the form of fees and refinance charges. An additional boon derives from installment lending, which increased by 112% from 2012 to 2015. These loans along with refinances amounted to an average APR of 567%.

The Impact of Texas Payday Loans

Nearly one in five payday loans end in defaulting on the loan. For Texans who can’t pay back their loan at the agreed upon time often roll over the loan, or enter into a new loan agreement with a later date. For this service, a fee is charged but can afford you extra time to pay back the loan. Payday loan lenders often expect borrowers to need to roll over the loan until the next paycheck is received and thus the debt cycle begins. It is for this reason that so many payday loan providers offer meager introductory rates to lure in consumers.

Escaping the Payday Loan Debt Cycle

Borrowers who are late on a payday loan or lack the means to pay it back have options. If creating a strict budget for your household and making sacrifices/adjustments in order to free up extra cash fail, it may be time to call your payday loan lender and ask for an extended payment plan (EPP). If your provider doesn’t offer an EPP, you may be able to restructure your debt with other lenders, enrolling in a debt settlement program, or by taking out a debt consolidation loan.

If taking out another loan isn’t possible due to an embattle credit score or other mitigating factors, you should consider obtaining credit counseling. A credit counselor can help you create a debt management plan to repay your payday loan and get out of debt. Consumers who decide to take this step should make sure to receive credit counseling from a US Trustee approve counseling agency. By ensuring your credit counseling organization appears on the US Trustee’s list, you’ll be able to use this certificate in a bankruptcy petition, should you decide to file a Texas bankruptcy.

A final solution to escape a payday loan is declaring bankruptcy. If you’ve exhausted all other debt relief options, you can eliminate debt by filing for Chapter 7 or Chapter 13 bankruptcy in Texas. Before doing so, however, you should meet with a Dallas bankruptcy attorney to ensure that bankruptcy protection is a logical option given your financial situation. Additionally, debtors who file bankruptcy without a bankruptcy lawyer are less likely to have all their payday loan debt discharged at the conclusion of the bankruptcy case.

Texas Debt Relief

Aside from the strict federal and state laws and restrictions placed upon payday loan and auto title lenders in Texas, some remedies can help you eliminate the debt from these financial instruments. These options include EEPs, credit counseling, debt settlement, loan consolidations, and bankruptcy. If you have been caught up in the payday loan debt cycle, make a call to a Plano bankruptcy attorney to get help in ending it once and for all. Using Chapter 7 or Chapter 13 bankruptcy, you may be able to eliminate your legal obligation to pay back payday loans completely.

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