How to get out of payday loan debt

Why payday debt is hard to leave

A typical payday loan is due in one payment about two weeks later, and the fee is often $15 per $100 — an APR of almost 400% (CFPB ↗). If the full balance would leave you short again, the easy fix is another loan or a rollover. CFPB research found almost 70% of borrowers take a second loan within a month, and one in five new borrowers ends up taking ten or more in a row (CFPB ↗).

Step 1: list every loan

Write down each loan: lender, amount due, due date, fee and whether it is set to debit your account. Order them by due date and by cost.

Example figures only.

Step 2: ask for an extended payment plan

Call before the due date and ask for an extended repayment plan, which lets you repay in smaller installments. Whether you get one depends on state law or the lender’s policy, and it may be free or carry a fee (CFPB ↗). Members of the industry association CFSA are expected to offer an extended payment plan where state law does not prohibit it (CFSA ↗). More in extended payment plans.

What to say when you call

A short script keeps the call on track:

“I have a loan with you due on [date]. I can’t repay the full [amount] without missing rent. I’m asking for an extended payment plan. How many payments would that be, on which dates, and is there any fee? Please send me the plan in writing.”

Write down the date, the name of the person you spoke to and what they offered.

Step 3: stop the next debit if it would sink you

If paying would leave you unable to cover rent or food, you can revoke the lender’s permission to debit your account and give your bank a stop-payment order. You still owe the loan (CFPB ↗). Use this to buy time for a plan, not to disappear. See how to stop automatic withdrawals.

Step 4: replace the costliest balance

Federal credit unions can offer payday alternative loans: PALs I from $200 to $1,000 over one to six months, PALs II up to $2,000 over one to twelve months, with interest capped at 28% and an application fee of no more than $20 (NCUA ↗).

A personal loan from a bank or credit union can also cost far less than repeated payday fees. Compare the total you would repay, not just the payment — see payday loan consolidation.

Step 5: get free or low-cost help

A nonprofit credit counselor can review your budget and may set up a debt management plan. Credit counseling is different from debt settlement, which carries more risk (CFPB ↗). Legal aid can help if you are being sued; servicemembers can use their JAG office (CFPB ↗).

Step 6: build a small buffer

Even $100 to $200 set aside can cover the gap that started the cycle. Ask billers for a due-date change to match your payday, and see alternatives to short-term loans for the next emergency.

Questions

Should I use a debt settlement company for payday loans?

Be careful. Settlement companies may charge fees and ask you to stop paying, which can lead to collection and lawsuits. The CFPB explains how settlement differs from credit counseling (CFPB ↗).

Can I go to jail for payday debt?

No, not for the debt itself (CFPB ↗). Respond to any court papers.