July 22, 2022
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Money Hacks

How to get out of a payday loan nightmare

Here’s how Elise got out of $4.5k debt and escaped the payday loan cycle

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Twelve million Americans turn to payday loans every year, spending $9 billion on loan fees. With some of them charging interest as high as 600%, it’s easy to get trapped in a payday loan cycle.

If you’ve found yourself in a payday loan nightmare, don’t be too hard on yourself. Payday loans are slippery b*stards designed to keep you in debt.

Don’t worry, there are plenty of solutions for getting out of the payday loan cycle.

Here’s how a member of the Cleo community, Elise, did it. We’ve also listed a load of alternative techniques for ending a payday loan nightmare at the end, too.

Over to Elise.

“I was doing absolutely fine for money in the first year of college

It got to summer, I’d just turned 19, I started to see this guy and he was in a really bad financial way. I did end up paying for a lot of things he wanted. We ended up running out of money really quickly, and then I started to take out these payday loans. These ones weren’t that bad, they were basically marketed as student payday loans. You could only get up to $500 every few months, then as soon as your loan came in they would take that back plus like $100 interest. I was taking out these student payday loans for the next couple of years throughout college.

Just a note: Elise clarified to us that she felt she had a choice over how she spent on her partner. But if your partner is controlling your finances in any way, this might be financial abuse. You can find 24/7 support here. Back to Elise.

When you start taking them out, you start living paycheck to paycheck

You pay one off, but then you’re down and you have to take your money out to bring your money back up. Me and my ex broke up after a few years and I was left with all of this debt. In relationships after that I felt like I was only appreciated if I bought stuff for people. I started taking out more, but it was the bad kind of loans with really high interest. My mental health spiraled.

Debt and mental health go hand-in-hand

I started going on antidepressants for quite a long time. I was staying inside all the time because I didn’t have any money to spend, and it got to the point where I had to come clean to my Dad. No one knew for a long time. I started doing night shifts three nights a week to make money. I could only keep that up for a couple of months. My grades at school were dropping.

My dad was pretty shocked because no one knew, you can get so good at covering this stuff up

He helped me a bit each week - just like $35 a week towards food, and he paid for my transportation. He traveled up to see me, sat me down and got me to do an excel spreadsheet. We had to go through all of my payday loans, all the emails I got, how much I owed.

It’s so tough having to lay it all out in front of you because you don’t want to be looking at that. Before that I was keeping all of the figures in my head, letting it build and build. He phoned up all the payday companies and got them to put me on a list to say they can never lend me money again. It’s similar to gambling.

I think it took two and a half years to fully pay it back

I was lucky because my Dad paid the loans off to stop the interest. Then I had to pay him back each month. A couple of months after I paid all of that off, I moved cities and started a new career for a salary increase. Payday lenders don’t do enough checks. They don’t look at how many loans that person has out. If there was an app like Cleo that I knew about at the time that would have been really helpful.

I’m pretty fortunate because I went through a lot of therapy for quite a few years

The reason I was taking out these loans was  to please other people. Even with my first girlfriend, I did take out another payday loan. I thought I’d finished all that. I took out a payday loan to book us a trip to Rome. It wasn’t for myself, it was to try and keep people close to me.

Now I have two credit cards

An AmEx with a $15,000 limit on and another that’s $2,000. I’ve had those for over a year and whatever I spend on them I always pay back at the end of the month. I’ve just been offered another $6,000 to add to the AmEx because my credit rating has gone up.

The advice I would give to people…

I would just say it’s so much better to be honest and open about it to people you’re close with. Otherwise it just eats you up. I was so scared about telling my dad. When I did I felt so embarrassed and ashamed but I had this huge weight fall off my shoulders.”

Thanks so much for chatting with us Elise 💙

Getting financial help from people close to you is just one way of ending a payday loan nightmare. Obviously, we know this isn’t an option for everyone. There are plenty of alternatives.

Here’s how to get out of a payday loan nightmare if you don’t have family support

The alternatives generally include taking out a much lower interest loan to pay off your high-interest loans, and creating a manageable payment plan. We’re not financial advisers, but we can point you in the direction of experts. These are the options Experian lists:

💰 An Extended payment plan (EPP)

💰 Debt consolidation loans

💰Payday alternative loans (PALs)

💰 A Debt management plan

Each option has its own pros and cons. Check out the full explanation of each on Experian’s website, so you can find the right one for you. The laws governing payday loans vary from state to state, so check what the laws are where you live.

How to avoid entering the payday loan cycle in the future

Obviously, the most ideal option is to not take out a loan with steep interest in the first place.

💰 Create a super tight budget so you can glide your way to payday. Our free money app is pretty good for that.

💰If you do need a quick spot, avoid interest to stop a downwards cash money spiral. Cleo’s Cash Advance** can offer up to $100, has 0% interest, and is aimed at helping you eventually not need it.

You can find out how to get a Cleo cash advance here.

In conclusion: f*ck payday loans. If you are working your way out of a payday loan nightmare: you’ve got this. Cleo’s got your back.

Enjoy this post? Give it a share or send it along to a friend. You never know, it could make a big difference. And of course, if you want to try the best money app in the world for free, just hit this link right here.

Big love. Cleo 💙

** Eligibility requirements apply.

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