I have a relative that has used payday loans to keep them a float sometimes. I was surprised since they had a decent job. After chating a bit with them, I found out that they had a habit of spending more than they earned.  Pretty much many items in the house were on a payment plan, credit card, or rent to own.

If you’re in a similar boat and want to get out of using payday loans, I have some suggestions.

Alternatives to Taking Payday Loans

Find out exactly why you’re short on money. Did an unexpected bill come up or did you forget about your semiannual bills? Was your paycheck shorted? Do you lack a budget or don’t stick to one? Finding the reason can help you avoid being stuck in this situation again.

Re-prioritize your your monthly expenses. Pay your  necessities first. Cut all your luxuries until you can get back on your feet.

• Housing: You need a roof over your head. If you have a mortgage, please focus on paying this bill to avoid foreclosure.
• Food: You need food to survive. Cut out all eating out expenses and stick to grocery foods. Eating sandwiches may not be the popular choice, but it’s the smart one.
• Utilities: Electric, phone, and water are important utilities. Cancel your cable bills and make sure you’re not paying too much for phone service. You can call and see if you can qualify for assistance or a special payment plan.
• Car **If you are way over your head with car payments, try selling it to break even. **

Contact the all companies that you’re in debt with and set up a payment plan. If you’re unable to pay the minimum for your credit cards, call them to set up an affordable plan. Ask them to waive fees and lower your interest rate. Some credit card companies are willingly to cut you a deal on your debt as this recession continues. They would rather get some money than no money. Some utilties like electric will work with you on catching up with bills.

See if you can get a short term loan with Lending Club.You may be surprised to see how reasonably priced the loan can be.

Rebuild Your Finances: Step by Step

Once you’re out of the whole, focus on improving your finances bit by bit. It is possible to get out of the cycle of debt.

Increase your income.

You can only cut your monthly expenses so much, so increasing your income should be a focus. See if you can increase your profile at work and ask for a raise. It may mean getting a second job temporarily. See if you can turn a hobby into side income.

Have a portion of your paycheck transferred to a high interest savings account.

Start small ($25/week) and automate your money to put into savings. You’ll become use to the slightly small paycheck as you start savings.If you can find the money to pay back the payday loan, then consider allocating that money into a small emergency fund for the next time you need help.

The first thing you need to save for is an emergency fund.

This step can help you build financial cushion, especially in turbulent economic times like these. Find an FDIC bank or NCUA credit union that offer high interest rates for savings and watch it grow faster.

Set up free online bill pay with your bank.

Most banks and credit unions offer money and time saving feature. Spend an hour setting this up with your bills, account numbers, due dates, and amounts, and you’ll only need a few minutes a month to keep it up.

Pay down your credit card debt.

Depending on your circumstance you may want to transfer over to a 0% interest card to speed the process up.

• Pay your bills on time. A good credit history can help when looking for a home as ahigher credit score leads to lower interest rates. I had a bad habit of losing paperwork, so I automated all my bills. It saves on late fees and stamps. Many banks have online bill pay as a feature.
• If you can, pay the full amount owed. Credit card companies might call you a “deadbeat“, but at least you’re not tied to them each month. If you can’t, then pay as much as you can. Try a debt snow ball (a technique Dave Ramsey advocates) or evensnowflaking. Find money in your budget to eliminate your debt.
• NEVER, EVER lend your credit card to anyone! Even if it is a trusted family member or family. This account is tied to YOU and you will be held responsible.

Your Take

Those are some things I’ve done to help me get out of credit card debt. What ideas do you have for those trying to dig themelves out of the hole? Any stories or suggestions?

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