How to Get Out of Payday Loans

First, stop the bleeding

If you're rolling a payday loan — paying the fee every two weeks to push the balance forward — you have probably already paid more in fees than you borrowed. The first move is to stop the rollover, not to find another loan.

Ask for an extended payment plan

Many states require payday lenders to offer an extended payment plan at no extra charge if you ask before the loan is due: the balance is split into several smaller installments over weeks or months, with no new fees. Florida, Indiana, Wisconsin, Washington, Utah, Idaho and Louisiana are among them, according to the CFPB's 2022 review of extended payment plans. Even where it's not required, many lenders will do it if asked, because a plan beats a default.

Call before the due date. Use the words "extended payment plan". Get the agreement in writing or by email before the next withdrawal.

Protect your bank account

Payday lenders usually hold authorization to debit your checking account. If a debit will overdraw you, you have the right to revoke that authorization: tell the lender in writing, and tell your bank in writing too, at least three business days before the scheduled withdrawal — that is your right under federal Regulation E. Your bank must honor a timely stop-payment on a recurring electronic debit. You still owe the money — but you stop the overdraft fees stacking on top of the loan fees.

Consolidate at a credit union

Some credit unions will refinance payday debt into a Payday Alternative Loan or a small personal loan at a fraction of the cost. Our PAL guide explains how to join one quickly. Bring the payday agreement with you.

Talk to a non-profit counselor

A credit counselor can negotiate with lenders, check whether your loan was even legal in your state, and set up a plan. Payday loans made by unlicensed lenders in states that prohibit them may not be enforceable; a counselor or a legal aid lawyer can tell you.

What happens if you stop paying

The lender will keep trying to debit your account, then send the debt to collections. Collectors are bound by the Fair Debt Collection Practices Act: they can't call before 8 a.m. or after 9 p.m., can't threaten arrest or jail, and must send you a written notice of what you owe. Payday loans are civil debts; not paying one is not a crime. A lender can sue, and in some states can get a judgment and garnish wages — which is why the plan or the consolidation is worth pursuing first.

Don't borrow your way out

A second high-cost loan to cover the first is how a $400 emergency becomes a $2,000 problem. If you need to borrow to close the gap, go back to the top of the cost ladder and work down.