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I feel trapped by payday loans. How can I escape the cycle?

A payday loan is a short term, high interest loan designed to cover your expenses until your next payday. Payday lenders increase their profits by making loans with very high interest rates, but borrowers often cannot afford to pay them back.  As a result, borrowers get trapped in a cycle of borrowing more each pay period and paying more fees to cover the original loan.  Payday loans seem like an easy solution for unexpected emergencies like a hospital bill or car repair, but usually end up costing more than you expect.

Below are some steps that you can take to get out of the payday lending cycle.

  1. Consider taking out a small loan with an affordable annual percentage rate (APR) from a credit union to help you get out of debt with the payday loan company. Always compare options from different lenders and find out about the terms of any loan before you commit to it. If you have trouble making your payments, contact your credit union right away to ask for more time or a payment plan.
  2. Contact your local consumer credit counseling service for help working out a debt repayment plan with payday lenders.
  3. If payday lenders are electronically withdrawing money from your bank account, tell the lender in writing they are no longer authorized to withdraw money from your account.  Also, send a letter to your bank to let them know that automatic withdrawals by the payday lender are no longer authorized.  Include a copy of the letter you sent the payday lender.  Be sure you date and sign the letters, as well as keep copies.

Some ways to avoid getting stuck in a payday loan cycle in the future include creating a budget and sticking to it.  Also, begin saving just a small amount each month.  See the article in this issue of The Alert called “Cleveland Saves” for helpful ideas about how to start saving. Additional information about payday lending problems and solutions is available on the Federal Trade Commission website at


This article was written by Legal Aid volunteer Iva Jeras and appeared in The Alert: Volume 30, Issue 1. Click here to read the full issue.

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