Loans Personal Loans How to Get out of Payday Loans By Justin Pritchard Justin Pritchard Facebook Twitter Website Justin Pritchard, CFP, is a fee-only advisor and an expert on personal finance. He covers banking, loans, investing, mortgages, and more for The Balance. He has an MBA from the University of Colorado, and has worked for credit unions and large financial firms, in addition to writing about personal finance for more than two decades. learn about our editorial policies Updated on April 21, 2022 Reviewed by Cierra Murry Reviewed by Cierra Murry Cierra Murry is an expert in banking, credit cards, investing, loans, mortgages, and real estate. She is a banking consultant, loan signing agent, and arbitrator with more than 15 years of experience in financial analysis, underwriting, loan documentation, loan review, banking compliance, and credit risk management. learn about our financial review board Share Tweet Pin Email In This Article View All In This Article Get a Different Loan Got Cash? Extended Repayment Create Cash Set Yourself Up for the Future In Over Your Head? Photo: Eric Hood/E+/Getty Images Payday loans can drag you into a debt trap due to high costs. It’s easy to rely on those loans, and you may even be able to roll over a single loan multiple times to delay repayment. But easy access leads to an expensive habit, and the money you spend maintaining those loans will prevent you from getting back on your feet. You can take several approaches to get rid of payday loan debt. We’ll detail these strategies below and discuss ways to prevent the problem from coming back. Strategies for Getting Rid of a Payday Loan Pay off the loan with a new, less-expensive loan.Pay off the loan with savings.Arrange an extended repayment program with your current lender.Temporarily increase your available cash to eliminate the debt. Get a Different Loan If you’re not able to pay off the loan at this time, a different loan can make it easier to get out of debt. Alternative Lenders Almost any other loan will be more affordable than a payday loan, so try different sources of money. Small community banks and credit unions are your best bet for getting approved, especially if you have bad credit or you have never established credit. Some online lenders also cater to borrowers with less-than-perfect credit. That said, whenever you’re searching for lenders who market to “bad credit” borrowers, you run the risk of using predatory lenders. Start with some of the online lenders or reputable peer-to-peer lending platforms. Consolidate Debt Instead of renewing existing payday loans, consolidate those loans with a more affordable loan and start paying off the consolidation loan. Borrow just enough to pay off your existing debt (and maybe enough to keep you from getting another payday loan)—and nothing more. It might seem like you’re borrowing from Peter to pay Paul, and you are, but you’re borrowing on much better terms. The key is to move away from payday loans for good. You’ll have more time to repay and pay lower finance charges. Get Help With Approval If you can’t get approved, consider asking somebody with good credit to co-sign for the loan. This person will essentially guarantee that you’ll repay on time. If you don’t, your co-signer will be 100% responsible for paying off that loan—so it’s a huge responsibility and risk for that person. A cosigner's credit will be damaged if payments come in late or if you default on the loan, and lenders can bring legal action against co-signers. Got Cash? If you’ve changed your mind about a payday loan for which you recently applied—or you came into some cash and your circumstances have changed—try returning the cash. Some payday lenders allow you to reverse the transaction within one business day of borrowing at no cost. Act fast and contact your lender because you may need to repay the loan before the close of the following business day. Extended Repayment When times get tough, and you are unable to repay payday loans, contact your lender and ask about your options. Some lenders offer extended payment plans and other forms of short-term relief. The friendliest lenders—including many of the large brick-and-mortar payday shops you see along busy streets—belong to the Community Financial Services Association of America (CFSAA), which has guidelines for setting up payment plans. Create Cash Sometimes finding more cash in the budget is your only option. There are two ways to do that: Earn more income or cut expenses. Neither is easy, but they’re both very effective. Increase Income If at all possible, find extra work. You don’t need a permanent job—you just need to hustle short-term to get out of any existing payday loan debt. Working more is probably the last thing you want to do, especially if you’re already spread thin. But think of the income as more than just the wage you earn. It’s also the money you avoid spending on numerous payday loan fees. That income can make the difference between spiraling into debt and getting back on your feet. You can also bring in cash by selling possessions. Like working extra, it’s not fun, but it’s better than paying finance charges. If working more is not an option, this might be your next best way to raise cash quickly. Cut Costs If bringing in cash isn’t an option, you’ll have to reduce spending until you’re back on top of your finances. That means cutting down to the bare bones. Make every meal yourself, and bring your lunch to work. Cut unnecessary costs such as cable, and find inexpensive ways to stay entertained. Set Yourself Up for the Future Once you’re on your feet, you’ll want to avoid going back to payday loans. You can do that by building a strong financial foundation. Build an Emergency Fund Set up an emergency fund, so you have cash on hand when you need it. Start by setting aside a few hundred dollars, and then build it up to $1,000. Eventually, you should aim to have three to nine months’ worth of living expenses in cash—enough to cover most of life’s surprises. Start small now and work your way up. Build Your Credit To get affordable loans in the future, you need good credit. If your credit is poor or you don’t have any credit history, establish your credit over time. Start by getting a small loan secured with cash (or try a secured credit card). Make all of your payments on time, and your credit will slowly improve. Then, it will be much easier—and more affordable—to cover larger expenses. In Over Your Head? If you’re deep in a payday loan trap, speak with a licensed credit counselor. For tips on finding local help, start with the National Foundation for Credit Counseling. Credit counselors help you dig into the details of your budget and potentially work with your creditors to find a way out. Bankruptcy might be an option, but it’s a big step and one you should only take after plenty of consideration and discussion with a local attorney. Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Better Business Bureau. "BBB Tip: How to Spot Predatory Lending." Community Financial Services Association of America (CFSA). "Best Practices for the Payday Advance Industry." Experian. "Co-signers are Responsible for Debt Repayment." FICO. "Payment History."