How to Pay Payday Loan in Installments

Payday loans are short-term, high-interest loans designed to support an individual between paychecks when she is short on money. She takes out a personal payday loan for the two- to three-week period until her next paycheck, and then uses the paycheck to pay off the loan. Occasionally, individuals may not be able to pay off the payday loan upon receiving the next paycheck due to extenuating financial circumstances. This results in either higher interest rates, or having the account turned over to a debt collection agency. Learn how to pay payday loans in installments to avoid such penalties.

Instructions

1. Understand the dangers of payday loans before you apply for one. Payday loans charge notoriously high interest rates compared to long-term loans. For example, a $15 fee on a $100 payday loan is equivalent to a 490 percent APR interest rate. This is several times higher than other loans. Avoid taking out a payday loan until you have exhausted all other methods of personal financing.

2. Contact the financial institution or corporation that services your payday loan. The contact information is found on all documents that you signed when applying for a payday loan, as well as on the loan disbursement check given to you at the start of the lending period. Explain your circumstances and notify them that you wish to pay off the payday loan in installments.

3. Verify any additional fees or charges involved with paying off a payday loan in installments. Typically, paying a payday loan in such a manner results in an extended payoff period, which means you are paying more in interest fees. Get any additional charges to your account verified in writing, in order to avoid being caught by surprise when you are paying your loan fees.

4. Attempt to extend your payday loan by the shortest amount possible. The longer your installment plan, the more interest accrues.

5. Create a budget that details all income and expenses. Check for ways that you can decrease spending on non-essentials in order to pay off your payday loan.

6. Get written confirmation upon paying off the loan. Consult a financial adviser to learn personal methods to help you avoid applying for a payday loan in the future.

Tips & Warnings

• Payday loans charge significantly higher rates than other types of loans and should be avoided when possible.

Resources

• Read this Article in Spanish