How to Escape the Payday Loan Trap:
2 Things You Can Do Right Now

Payday loans are often easy to get, but they can trap you in an endless cycle of debt. There are ways to escape, but it isn’t easy.

Of course, the best escape is to never get trapped in the first place. If you haven’t taken out a payday loan yet, try everything else you can think of to get the cash you need.

Likewise, if you’re already caught in the payday loan cycle, the first step out is to try to find more money.

1. Use these tried-and-true ways to raise cash.

Some of the items listed below may take a lot of effort, and be uncomfortable or embarrassing. A payday loan might seem a lot easier, but borrowers who get trapped by these short-term loans eventually end up taking many or all of these steps to get themselves off the payday loan treadmill.

So do the hard work now, instead of later:

• Borrow from family or friends.
• Ask your employer for an advance on your next paycheck.
• If your credit is still good, or at least okay, try for a personal loan through an online lending marketplace like lendingtree.com, or a peer-to-peer lending site like prosper.com. Or, apply for a small “signature loan” (an unsecured loan) at your bank or credit union. (Some banks offer payday loans, but those can be just as expensive as similar loans from other companies.)
• If you need money to pay a utility or telephone bill, call and ask about setting up a payment plan. Check whether any local nonprofits offer emergency assistance to help families make ends meet in a crisis.
• If you are in the military, contact the charity or relief society for your branch of the service; there may be free help available.
• Sort through everything you own, and sell anything you can on eBay, Craigslist or similar sites, or hold an old-fashioned garage sale.
• Rent out your spare bedroom, your garage, your car, your parking spot or even your lawn mower. Whatever you own, if someone might be willing to pay to use it, post announcements saying it’s for rent.
• Go on a budget, and slash all possible expenses. Carpool, take public transportation, ride your bike or walk whenever possible. Get rid of cable. Get rid of your Internet access, and log on at the local library or other free Wi-Fi spot. Get a low-cost, low-use phone. Use cash-back websites. Use coupons. Only buy what you absolutely need (food, toilet paper) and shop the sales.
• Find extra work. If it’s a possibility, volunteer to work overtime. Get a part-time job for a few hours a week. Make a list of the skills you have that people might pay for, and do odd jobs - mow lawns, haul trash to the dump, bake cupcakes, design websites.
• If you’re in good health, you might be able to get cash for your blood, blood plasma, sperm or eggs. To find local companies or organizations that pay for these contributions, search for “_____ donation in _____” listing the type of donation and your location.

Whatever extra cash you’re able to raise, use it to pay off your payday loan balance. And when the loan is paid off, keep bringing in extra cash until you have a $500 emergency savings fund, to avoid the need for a payday loan in the future.

2. Take steps to protect yourself and gain control.

If you’ve already taken out a payday loan and can’t repay it right away, here are ways to protect yourself from spiraling interest rates and fees:

• If the payday loan company is automatically taking payments out of your checking account and you’re falling behind, open a new account, and have your paycheck automatically deposited into that account. Then close the old checking account, and immediately write the payday lenders, notifying them that you are going through financial difficulties and want to set up a payment plan. Include a “good faith” payment on your account – and pay with a cashier’s check or money order (do not give them a check with your new checking account number on it). Take this step before you rack up multiple bounced check fees on your old checking account.
• Some states require lenders to set up extended payment plans. If your lender won’t work with you, contact the state agency that regulates loan companies.
• If you still have an active credit card, use a cash advance to pay off the payday loan, and continue finding ways to raise extra cash to pay off the credit card as soon as possible. You’re still paying a high interest rate on the credit card, so it’s not an ideal solution, but it’s more manageable than the high fees on a payday loan.
• Contact a local legal aid program for free or low-cost legal help.
• Declaring bankruptcy should be your last choice; it ruins your credit, and there’s a lengthy waiting period before you can file bankruptcy again, if you need to. Payday loans are typically relatively small sums, so unless you have a lot of other debts, most experts recommend finding another way to get out of the payday loan trap.

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Be wary of any “quick and easy” loans, and remember that while quick cash might solve your immediate problem, it’s not a long-term solution, and could be a long-term burden. For help improving your financial outlook, the Consumer Federation of America (an association of nonprofits) offers practical tips for dealing with ongoing cash and debt problems.

• Tips for resolving other complaints:
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• Buying or selling a home? Read these insider tips first.