5 Tips for Breaking the Payday Loan Cycle

This story originally appeared on The Penny Hoarder.

A payday loan can provide quick respite from unexpected expenses or a run of bad luck.

But if you don’t have enough money to repay the loan on your next payday, you may need to take out another loan or transfer your balance to a new loan with interest rates that can exceed 300%.

According to Consumer Financial Protection Bureau1 in 5 new borrowers ends up taking out at least 10 personal loans.

This payday loan cycle can turn a short-term loan of a few hundred dollars into a growing mountain of debt totaling thousands of dollars. And when you’re so far behind, it’s hard to move forward.

If this sounds familiar, read on for practical tips on getting payday loan relief.

1. Reduce your costs

Reducing your expenses can be one of the hardest ways out of the payday loan cycle if you’re already living on a tight budget and struggling to find ways to save. If you cannot reduce costs, you may need to seek help to temporarily cover some of your costs.

Asking for help takes strength, but it might make it easier to find extra money in your budget, even if it’s just for a month or two. You may be able to access free meals for your school-aged kids or visit a local food pantry to get by on a lower grocery budget. College students may be able to apply for help from an emergency financial aid fund.

Your church or local community groups may be able to get you temporary help. You can also call 211, the United Way Health and Social Services Referral Line, which can direct you to services in your area, or visit 211.org to locate resources.

2. Earn more income

Kisha Howard from Orlando, Florida turned to payday loans when she felt she ran out of options to make ends meet. “At the end of the day, if you didn’t have the money to begin with, you still won’t have it,” she warns.

To bridge her financial gap, she worked as much overtime as she could to supplement her income. “Each pay period, I reduced the loan amount needed until I no longer needed the extra funds and could cover the bills with my income,” she says.

If you have spare time and energy, it may be worth take a side concert. Consider selling your services as a pet sitter, weed puller, or courier — these side businesses don’t require a lot of start-up costs.

3. Use a boon for payday loan relief

Lisa Servonprofessor at the University of Pennsylvania, has studied the payday loan landscape for years, speaking to hundreds of borrowers about their experiences.

She said getting out of the payday loan cycle often requires some sort of windfall, recalling a woman she interviewed who used her tax refund to pay off her loan. “She really targeted her tax refund from the earned income tax credit, paid off the loans, and then really cut her expenses and watched her spending,” Servon says.

Getting a huge tax refund isn’t ideal, but if you expect to get a little back from Uncle Sam, it can help you out of that payday loan hole.

4. Request payment terms

Looking back on her payday loan experience, Kisha Howard calls it “a very expensive shortcut.” She says it’s “best to budget accordingly and ask for bill arrangements if necessary.” Businesses work with you when you communicate.

You may be able to negotiate lower bills for essentials like utilities or set up a interest-free payment plan to make larger bills more manageable.

5. Talk about it

“Advocacy and organizing are the solution,” says Maurice BP-Weeks, co-director of Action Center on Race and the Economy.

He likens the payday loan landscape to the housing crisis of the Great Recession. “If you got into the spiral, it’s really not your fault,” he said. “Contact the CFPB or your local representative and explain your situation. It is not fair. Companies should not be allowed to sell these products.

Likewise, it can help to be open about your situation with friends and family. You may be able to offer valuable advice before someone you know turns to payday loans in times of need.

A dozen states have banned short-term, high-interest loans, but it’s still easy to get a payday loan — and get trapped in the cycle of debt — in most of the country.

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