As per research by the credit management company Lowell, “over 77% of students have personal debt issues while studying at university.” It is because students have many short-term cash requirements like- car-refuelling, paying credit card debts, stationery needs, etc.
Most students face a cost-of-living crisis due to snowballing tuition fees and rent. And with the average tuition fees being the highest in the world, no wonder 50% of students worry about meeting basic living expenses.
For this, they rely on small cash facilities like payday loans. Most earning students find it easier to qualify for these loans and meet the requirements. Increased dependency on payday loans results in debt arrears. It impacts the credit report and could prove troublesome in loan default.
Regardless of the fact that payday loans are easy to qualify for, they have high APRs. It is just a bit lower than credit cards. It is the reason individuals missing payments face huge loan debt later. Research also suggests that 41% of students drop out of university due to money issues.
Thus, analyse the best ways to clear the debts. Familiarity with debt payments would help you manage debt and avoid paying extra on the loan.
6 Ways students can ensure regular payments on payday loans
Payday loans are high-cost loans that one must pay the next day after receiving the salary. It is ideal for any purposes before the salary day. These are short-term unsecured loans popular in the UK for their ease of availability.
These are instant loans for students to meet any requirements without delay. One can get the cash within 30 minutes of loan approval. One can pay the loan within 30 days. Some lenders grant the flexibility to pay within 12 months as per financials.
If you often skip the payment date and face payday loan arrears, the below tips will help ensure regular payments:
- Analyse the impact of one missed payment
Before availing of payday loans, analyse your finances and its impact on them. Identify how missing one single payment may impact your finances and credit score. Payday loans are competitive. They have high APR. It implies if you miss a payment, you pay more. If you lack income, it may not be ideal for you.
If you are already on one, budget for the payments. Identify the expenses that you can reduce to ensure regular loan payments. It keeps the loan costs stable and helps clear the loan without worries.
- Opt for a direct debit system
Students engaged in different tasks find it hard to remember certain things. Debt repayments are one of them. If you find it hard to make timely payments, direct debits may help.
With this, you may automatically pay the lender.
It deducts the respective amount from the account monthly on the due date. You should ensure sufficient bank balance for automatic deductions. Direct Debits help you avoid missing a payment and improve your credibility with regular loan payments. If finances do not support it, you can switch to manual payments.
- Explore new earning ventures
If you depend on a single part-time income, you struggle with payments. Moreover, you could hardly attend to other life aspects comfortably. Thus, explore other part-time or full-time opportunities that align with your lifestyle and liabilities. It helps ensure regular payday loan payments but saves money.
Most students struggle to get employment opportunities after a furlough or a long period of unemployment.
Do not worry; consistently make an effort towards it by mastering the need of the hour skills. It will help you grab a potential job opportunity and improve your financials.
- Extend the loan repayment period
Students try to pay the payments consciously. However, one is habitual to skip certain things. If you believe that with your existing finances, you cannot pay the loan by the decided term, extend it. Contact the lender and familiarise him with the situation.
Do not wait until you miss the 7th or 8th payment. It may hurt your credit score significantly. Moreover, the overarching costs may increase the payment burden. It is advisable to contact the lender just after you miss 3 payments in a row. Do not wait beyond that.
Missing 3 payments indicates that your current finances are problematic. The lender may help revise the repayment structure according to your existing finances.
If you were to pay £1200 within 4 months, extend the repayment to 6 months based on the need. Some lenders may help you with that. However, choose the right term. Do not extend it for the sake of it. In case of confusion, take the expert’s help.
Myfinancialloans, a leading financial expert and direct lender, help individuals with repayment issues and suggest suitable solutions. It undertakes personal finances and liabilities at the core of the evaluation and helps the students manage debt.
- Identify the scope of pre-payment
Payday loans are short-term loans. Thus, you may find some lenders providing the opportunity to clear loans early. It would benefit your present finances but your credit score too. Payday loan debt is a high-interest debt. Thus, paying a costly debt positively impacts your credit score. It may improve by a few numbers.
Moreover, by paying the loan early, you can avoid paying any extra interest and other costs. Thus, it is a great way to save some bucks. Decide the amount you want to over-pay. Identify whether it may impact other important expenses or not.
If not, you can overpay some amount with the loan payment. It is ideal for students receiving inconsistent payments if working as a part-timer. It would automatically reduce the loan term and help you get debt-free early.
- Request some time off or a payment holiday
It is unusual for any lender to provide a payment holiday on payday loans. You may be lucky at times. In payment holidays, you can halt the payments for around 3 months. Work on your finances and seek income increments or shifts. It would help you clear the dues after the duration. The interest costs continue while you halt the payments.
Bottom line
Analyse the best ways to clear payday loans as per your finances. After that, create an emergency fund. Work on your credit score. Payday loans and non-repayments impact it drastically. Review expenses and seek ways to improve them. Go for payday loans only if you have no other option.
