Fig's Ultimate Guide: How to Get Out of Payday Loans and Leave Bad Credit Behind

Original Post: August 20 2020

Payday loans are convenient funds when you need money in a pinch, but these loans have the potential to create a financial nightmare if they’re not paid off quickly. Payday loans often have high-interest rates and fees that make them particularly difficult to repay. We’ve even heard of lenders who only accept payments on specific dates and won’t take partial payments!

So you’re in a payday loan and can’t seem to get it paid off despite your best efforts. What are ways to get out of payday loans? Here’s our step-by-step guide to making that payday disappear!

Step 1: Understand Your Loan(s)

The first step is to know what we’re dealing with. Collect all the documents for your loans and write down how much you owe for each loan and try to calculate the all-in cost of that loan. This means you have to include both the listed interest rate and any regular fees you pay on the debt. Lenders sometimes do tricky things like hiding costs in subscription fees, everything you pay to the lender should be included! Fig has the following guides to help you understand interest, and calculate the cost of your loan.

It's okay to still be unsure. Once you get all the information together, you can contact a non-profit financial coach who will help you go through it! One of our partners LISC has over 100 Financial Opportunity Centers across the US that you can turn to for help understanding your loans.

Step 2: Find and Prioritize Your Highest Cost Debt

Once you understand your loans, you want to work on your highest cost debt first because it will have the biggest improvement on your budget. This loan doesn’t necessarily have to be a payday loan, it could be an installment loan, title loan or pawn shop loan. Generally speaking, payday loans are often the highest interest rate, followed by title and pawn shop loans, with installment loans on average being the lowest of these higher cost interest categories.

Step 3: Negotiate with the Lender

Lenders want to receive the money they are owed, and are often willing to be flexible about repayment if it means you have a better chance of paying them back. Depending on the lender, you may or may not be able to get a small discount on your total debt if you offer to pay it off all at once. It never hurts to ask though! As you consider debt settlement, management or repayment plans, take a look at our extensive guide on the differences and how to protect yourself in the long run.

Just make sure you know the total amount you need to pay off the loan, and be specific about getting the lender to agree which date this payoff amount relates to! Ideally you want the lender to commit in writing to the payoff amount that will close your loan by a specific date in the near future.

Step 4: Get Money to Pay Off Your Loan

If you have the savings or room in your budget, then you’re good to go. If you’re short a few hundred dollars or the entire amount, that’s ok. Our goal is to get this high interest burden loan removed from your future expenses and here’s where we get creative. Starting with your lowest cost options, we’ll cover a few different ideas that can help you put together the money to pay off this payday loan. I cannot emphasize enough how many resources non-profits have that can help you understand, negotiate, and payoff high interest payday debt!

    Free ways get money
  1. Borrow from friends and family
  2. Sell things you no longer need or use
    Very low cost potential sources of money
  1. Contact a non-profit that has a payday loan reduction program
  2. Talk to your employer about an advance
    Consider cheaper sources of money
    If you’re paying down a 400%+ interest rate payday loan, you can still benefit greatly if you borrow from another lender at a lower rate to pay down this loan. This is sometimes referred to as refinancing or debt consolidation. Assuming we’re talking about a high interest payday loan, almost any loan option will result in a lower interest rate so you shouldn’t be shy about shopping around for a better lender. For more advice on picking a lender, you can check out our blog post on getting the most out of your personal loan.

Step 5: Pay Off that High Interest Payday Loan!

Now that you’ve got funds together, get ready to pay off your loan on the day you agreed to with the lender! First, be sure to include the letter you got in step 3 so you can hold the lender accountable for the total payoff amount. Second, make sure you get a receipt and proof of payment. Store those away in a safe place and have a wonderful debt-free evening! Congratulations, you just made a very financially savvy move. Wealthy individuals do this all the time to reduce their debt costs and it makes their dollars go a lot further. If you’re feeling excited, good!

Did our guide work for you? Any additional tips to add from your experience paying down debt? We'd love to hear more at, Facebook, Instagram, and Twitter.