According to the Pew Charitable Trusts, the average payday loan borrower takes out eight cash advances in a year and spends $525 in interest on just $375 of principal as of 2012. This shows that too many people are stuck in a cycle of using cash advances to pay off ordinary living expenses.
Listen to wisdom when trying to rid your cash advance debt.
When this happens to you, you may want to consider credit counseling. This is a service that will help you look at your finances and come up with a plan to pay it off. If your situation merits it, a credit counselor will even negotiate with your creditors for you to get lower interest rates in an effort to pay off the debt. Not only will this service allow you to pay it off sooner, it will provide lower payments so you have more money left over each pay period. Doing so will promote saving money those rainy days or to pay down the principal on a cash advance loan, credit cards, car loans or mortgages.
When you go for your initial meeting with a credit counselor, you will want to disclose all your financial information; include everything you would need to get a realistic look at your finances. Compile the data: net household income, living expenses, creditors, debt for each, old budgets, bank statement, assets and liabilities. In order to begin anew, you need to have a clear and honest picture of the past and present.
Once the information is analyzed and organized, a new budget can begin to form. Prioritizing payments and strategizing short-comings will be addressed as the new budget is built. This new budget will be supported by household income rather than third party money supporting the household. Whatever it takes to break the cash advance cycle will need to be enforced.
- Consolidate debt to lower monthly demand on income. You don’t have to take out a second mortgage. Turning unsecured debt into secured debt is not the best choice for those who struggle financially. Credit cards offer a great avenue for at least partial consolidation. Transfer high interest debt onto low interest accounts. This is especially true for cash advance debt. Heavy interest payments will continue to limit principal payments.
- Seek out more permanent solutions only as last resorts. Credit consolidation and debt relief programs may help lower monthly payments, but they are still detrimental to credit scores. They each have their pros and cons. It would be in your best interest to discuss these options with your credit counselor who is not affiliated with either program.
- Find a friend or relative who could act as your mentor. Someone you feel comfortable with sharing your financial situation and whose advice you would be willing to listen to when problems arise. Don’t tell yourself a new budget will never have a problem. Financial emergencies come uninvited. The last thing you will want to do is to get back into the cash advance cycle once more.
Don’t be ashamed to admit you need help with finances. Don’t waste any more time sinking further into cash advance or credit card debt trying to keep afloat. Find a credit counselor which is not affiliated with credit companies or money relief programs in order to get the most unbiased strategies to better your future finances.
