The payday loan cycle is sometimes referred to as the payday loan trap. Unfortunately, over 50% of all payday loan burrowers find themselves stuck in the payday loan cycle and it’s not a very pleasing thing to deal with. What it means, is that you are forced to take out a second payday loan in order to pay off your initial loan. You may then find yourself unable to pay off your second loan, leading to consecutive borrowing that can seem never ending. Recognizing when you are falling victim to the payday loan cycle is important. If you can get out of the trap sooner, rather than later, then you can recover your finances and regain your financial stability.
1 – You are having trouble coming up with the funds to pay off your loan
The first sign that you are stuck in the payday loan cycle is if you are struggling to come up with enough money to pay off your loan. This could be because you didn’t receive enough money from work or because you spent part of your paycheck on other bills or financial obligations. If you are having trouble gathering enough money to pay off your payday loan, you need to be concerned. Payday loans are considered short-term financial assistance. Within just one to four weeks, you are expected to begin making payments toward the loan and you may even be required to pay it off in full within this timeframe. This is why it’s highly recommended that you have backup funding available before you commit to a payday loan. If things do not go as planned, then you will be in a very unfortunate situation.
2 – The payday loan company has recommended an additional loan
Payday loan companies are very familiar with the payday loan trap and they are strong advocates for it. After all, the more customers they have stuck in the payday loan cycle, the more successful they will be as a business. If your payday loan agent has recommended that you take out an additional loan, then you are being setup to fall into the trap. Once that second loan is taken out, you’re likely going to struggle even more than you have already.
3 – You are asking for a longer repayment period
The repayment terms on payday loans are somewhat flexible, but extending the amount of time you have to pay off the loan will only cost you more money in interest. It’s recommended that you stick to the payment schedule they have set in place for you. If you are thinking about asking for a longer repayment period, this is an indication that you are struggling to make the payments and may end up a victim to the payday loan cycle.
4 – You have no backup funds to pay off your loan
If worse comes to worst, you need to have backup funds available. If you don’t have any money available or an alternative option if you can’t afford your loan, then you are likely to end up in the payday loan cycle. Without cash, your only source of money would be to take out an additional loan in order to afford your original.
5 – You have debt on your credit cards as well
If you have debt on your credit cards and other financial obligations besides your payday loan, this could lead to trouble. Managing all of this debt can be difficult and if you expect to pay off your payday loan on time, you are only placing more burdens on yourself. The challenge of managing payday loans alone is already strenuous enough.