(Deanne from Wisconsin) Do you offer credit counseling services relating to payday loans?
Dear Deanne:
Credit counseling organizations are willing to counsel you on all types of debt. It sounds like you are asking if payday loans may be included in a debt management program.
A debt management program is a special repayment program that allows for making a monthly consolidated payment on unsecured debts that is usually less than you are paying in combined monthly minimum payments. It is especially beneficial for managing credit card debt, and many personal loans can also be included to include benefits.
Unfortunately, payday loans are not considered to be necessarily unsecured. Often the payday lender has access to your bank account or may cash your personal check that they have been holding. Furthermore, payday loan companies do not reduce your interest through debt management programs.
You should understand that while credit card interest rates rarely exceed 30%, payday loan interest rates are more than ten times that amount. Anyone considering a payday loan should seriously reconsider their other options.
I realize that the lesson is too late in your situation, so I do not want to beat you up over your decisions to take out multiple payday loans. There really are only a couple of options.
- Choose one and pay it off in full. Then move on to the next loan and pay it off in full. Some will likely be sold to collection agencies before you can deal with them. While this is damaging to your credit score, at least collection agencies cannot legally charge 391% APR.
- Obtain a personal or secured loan through your credit union or community bank. Collateral or a cosigner will likely be required.
- Default on the loans and save money to protect against future legal action.
Please note that taking out yet another payday loan is not an option. I hope this is helpful. Thank you for your question.
