The average cost of a payday loan is equivalent to an annual percentage rate (APR) of nearly 400% — in other words, borrowers who keep rolling over their payday loans could pay 4x the amount they originally borrowed over the course of a year.
Payday lenders may have you think that rolling over your loan is the only way to pay off your debt, but that’s not the case. Here are a few alternative ways to break the payday loan cycle:
Personal loans are lump-sum loans that are commonly used to consolidate more high-interest debt, such as payday loan debt. They come with fixed interest rates and repayment terms, which means that your monthly payments will be the same while you repay your debt.
These debt consolidation loans are typically unsecured, which means that you don’t have to put up an asset as collateral. Because they’re unsecured, lenders determine your interest rate and eligibility based on your credit score and debt-to-income ratio.