I racked up £11,000 in debt because of payday loans and overspending — here’s how I paid it off in just 18 months
Maryanne is a 34-year-old safety director for a pharmaceutical business in Oxfordshire. She was stuck in the “vicious loop” of taking out Direct Lenders called Ipass Loans to finance her expenditures as a student at Oxfordshire University.
After using payday loans and overspending, Maryanne was capable of paying her PS11,000 debt within a little over one year.
The spreadsheet was created to track the amount she owed, and the person she was due it to.
Payday loans are short-term loans for small sums of money given to those who are struggling to make ends meet until their next payday, but they often come with exorbitant interest rates.
Maryanne’s reliance on these loans, combined with mounting credit card debt from shopping too much at her favorite stores, resulted in a loan of $11,000 after she finished her studies.
Maryanne fell into the frequent pitfall of taking out additional loans to pay off her obligations.
The woman took out 6 payday loans in total, totaling PS3,200 in debt.
Also, she owed PS2,500 for in-store cards. These are credit cards that are only valid only at one store.
The credit debit card had increased to close to PS3,200. Her overdraft was now at PS1,700, and she was owed PS690 in her cell phone account.
“I felt defeated because I was in debt,” Maryanne explained.
“All I wanted to do was get out of this situation as quickly as possible.”
I was unable to make certain the payday loan repayments I was also constantly bombarded with emails, phone calls, and emails.
“It was terrible to be pursued by a debt collection agency because some of the firms with whom I took out loans transferred my debt to them.”
Maryanne decided she wanted to “stop making me hide my head in the sand” and pay off her debts in 2014.
In less than one year, she completed her debts and started to accumulate assets. She eventually bought the home she wanted. She describes how she accomplished this.
Method of snowballing
Maryanne sat down and sorted through her cash, attempting to figure out how much she owed and to whom she owed it.
“I made a list of every firm I owed money to and calculated how much I could pay each month to pay off each obligation,” she said.
“I called each lender and told the truth about my obligations to see if I could come up with a more acceptable repayment arrangement.”
After negotiating higher repayment rates with the bulk of her lenders, Maryanne was able to repay more than the minimum every month, she was able to select which bills to focus on. “I used the snowball strategy to pay off my obligations,” she said. “That meant paying off the smallest bills first and the largest debts last.”
Many experts recommend paying off the loans with the highest interest rates first, as this strategy will save you money in the long run. However, this strategy is not appropriate for everyone.
“I thought it would inspire me to keep paying off debt – I wanted to show that I was making progress toward my objective,” Maryanne added. From a psychological standpoint, this strategy helped me stay focused on my goals.”
Maryanne was determined to reduce her expenses in order to get rid of her debts quicker.
“Every month, I’d like to spend PS100 on food, avoiding branded things and buying in bulk,” she said.
“Meal planning allowed me to stick to my budget because I just bought what I needed.”
She was capable of canceling her subscription and saving more than PS100 every month. “I canceled a gym membership and saved PS40 each month by canceling various magazine subscriptions.”
Maryanne has also admitted her decision to “abandoned my social life” in order to save PS250 per month.
She used to pay up to PS100 per month to see her friends and PS150 per month for train tickets to see her family and lover. The girl, on the other hand, changed her mind and decided to stay at home and save money.
Be concerned regarding credit scores
Maryanne spent 18 months trying to pay back her loan. “I felt fantastic,” she said, “but then I realized I had no funds.”
“I could have been accumulating money for a vacation or an emergency fund if I hadn’t spent so much time paying off my bills.”
Since she was late with some installments on payday loans the debt left the appearance of black markings on the credit report.
Your credit score reflects how successfully you’ve managed debt over the previous six years.
It is used by lenders to determine whether or not to extend credit to you. Low scores may therefore prevent an application from being evaluated.
Maryanne needed to wait until the year 2020 to consider seriously buying the home she’d saved for. Black marks on your credit report make it more difficult to get a mortgage, but her credit score had improved significantly at that point.
“I’m sorry I took out payday loans,” she admitted. I was in a dire financial condition at the time, but if I could go back in time and do it again, I would.”
What options do you have for obtaining assistance with your financial obligations?
In the exact same situation as Maryanne and are unable to bring the debts out of your way, here are some actions you could consider. Here’s the best way to help you get out of financial difficulties.
Investigate your financial situation.
If you’re having trouble repaying your loan, it’s tempting to simply ignore it.
But, the initial step should be to take a seat and determine the amount you owe as well as who you owe it to.
After you’ve finished, you’ll be able to create a budget based on your expenses to see how much you can pay off your debts. If you contact those who owe you money and remain open and honest about your situation, you might be able to come up with a reasonable repayment plan.
Make your debts the top priority.
If you’re struggling to find enough money to cover all your bills begin with those that are the most costly. They could, for instance, could lead to the loss of your house or require you to pay high-interest rates, such as your mortgage taxes, council tax, or energy bills.
More than the bare minimum
Try to pay more than the minimum payment on your loan each month if you are able.
It will take much longer to pay off your debt if you only make minimum payments. You will also pay extra interest. Calculate how much you can afford to pay each month and prioritize your bills.