Advertiser Disclosure

Can Credit Counseling Help with Payday Loans?

Home > Credit > Credit Counseling > Can Credit Counseling Help with Payday Loans?

When in need of quick cash to pay a bill or an emergency expense, a payday loan is often the easiest place to turn. It is also often the most costly and dangerous to your long-term financial  health.

Studies indicate that as many as 12 million Americans turn to payday loans every year, racking up $9 billion in fees along the way. More troubling, what should be a short-term fix to weathering a brief financial storm can easily grow into a hurricane of debt, as new loans are taken out to pay off old ones while steep fees accumulate.

If you find yourself stuck in a vicious cycle of payday loan debt that is threatening to bring your financial house crashing down, it’s important to know where to turn for help. Credit counseling can assist you in finding the best way out of the payday loan trap and ensure that you don’t fall into it again.

What Is a Payday Loan?

There is no hard-and-fast rule for what constitutes a payday loan, but generally speaking, it’s considered a short-term, high-interest loan, for $500 or less. As its name implies, it’s geared toward helping borrowers bridge expenses to their next payday (typically two weeks), when the loan is usually due.

Also known as cash advances or check loans, payday loans can vary significantly in nature and structure from state to state, assuming they’re legal in the first place.

In 17 states and the District of Columbia, they are either prohibited outright, or have been forced into extinction because of interest rate caps that make them unprofitable for lenders.  Where they are legal, regulations may limit repeat borrowing and loan amounts, mandate waiting periods, and set other restrictions.

None of that, however, has stopped the payday loan industry from thriving in a cash-starved society. In 2017, there were more than 14,000 payday loan storefronts in the United States, on par with the number of Starbucks and McDonald’s stores. And then there’s the flourishing online market for payday loans, which can pose their own unique dangers.

It’s not hard to figure out why payday loans are so prevalent: More than half of payday loan borrowers have trouble paying for basic monthly expenses such as rent or utility bills and have few alternatives when in need of money quickly.

It’s also not hard to figure out why you don’t want to get anywhere near a payday lender. The fees they charge can easily amount to a 400% annual interest rate on the original balance (the typical fee is $15 per $100 borrowed).

Unfortunately, borrowers find themselves trying to dig out of a deeper and deeper hole if they “roll over” their loan because they don’t pay off the balance by their next payday, when the loan is due. The lender will charge another fee to roll over the loan. After four weeks, a $300 payday loan that has been rolled over can rack up fees totaling $90 or more.

Credit Counseling and Payday Loans

For those who find themselves trapped in the vicious cycle of payday loan debt, the top priority should be getting their financial house in order. That is where credit counseling can come into play.

Credit counseling agencies can offer advice on budgeting, managing money and other basics of finance, as well as avoiding bankruptcy and building emergency savings. Although payday lenders often refuse to work with credit counselors on eliminating a client’s debt, reputable counselors can still provide valuable advice on how best to get out from under the loans.

In some cases, counselors may suggest creating debt management programs or debt-consolidation plans for paying down debts with creditors, or in extreme cases filing for bankruptcy protection. Any of these solutions could make it easier to pay off your payday loan balance, and avoid taking one out in the future.

If you choose to pursue credit counseling, the first step is to find a reputable counselor who will put your financial welfare first. A good place to start is the National Foundation for Credit Counseling (NFCC), a nonprofit network of member agencies that are vetted for quality and integrity. Be forewarned that there is no shortage of credit-repair or counseling scams that may only make your financial situation worse, so do your due diligence when vetting credit-counseling firms and insist on a NFCC accredited agency.

» Learn More: Payday Loan Consolidation

Other Payday Loan Options

Whether or not you choose to consult with a credit counselor, it’s important to know your various options for eliminating and avoiding payday loan debt. Although the situation may appear hopeless, there is almost always a way out of this financial hole. It’s just a matter of finding the right tools.

Some options worth considering include asking your employer for a paycheck advance, researching community groups or nonprofits that offer emergency financial help, or asking family or friends for assistance.

Then there are these tried-and-true strategies:


Create a family budget that eliminates any unnecessary expenses at least until you can pay off your high-cost debt. A budget is basically a way of tracking how much money comes into and leaves your household each month, and there are many simple methods for creating a budget and managing one.

Start by eliminating shopping trips, dining out or travel. If this isn’t enough, take a look at your utility bills for areas of further savings. Call your utility providers to see whether you qualify for low-income discounts or cheaper plans or rates, or whether they can work with you on a payment plan for outstanding balances. Things as simple as downgrading to a cheaper TV or cell phone package can add up to significant savings over the long haul.

If that’s still not enough, consider possible savings on big-ticket expenses like housing and transportation. Can you move into a cheaper apartment or house? Can you sell your car and get by with a cheaper model, or even public transportation?

Extended Payment Plans

As the name implies, an extended payment plan gives the borrower more time to pay off the payday loan without accruing additional costs.

Payday lenders that are members of the Community Financial Services Association of America are required under the agency’s best practices to “offer a reasonable repayment plan to customers who are undergoing financial hardship and are unable to repay a loan in a timely manner, including a no-cost extended payment plan to those customers who cannot repay a single-payment small-dollar loan.”

Before taking out a payday loan, make sure your lender belongs to the CFSA. And if they balk at offering you an EPP, be sure to point out the agency’s best practices when it comes to working with clients on repaying loans.


Filing for bankruptcy protection should always be a last resort when searching for options to eliminate your debt. But in severe circumstances, it can be the only realistic choice for resolving a financial crisis and starting over.

While the bankruptcy process provides a legal avenue to reduce, restructure or eliminate debts that you cannot pay, it does come with consequences. A bankruptcy filing can remain on your credit record for up to 10 years, making it difficult to access new lines of credit, or even find a job. For those reasons and more, it’s important to consult with a reputable credit counselor before deciding whether it’s time to take this step.

Why Credit Counseling?

It can’t be said enough. Taking out a payday loan is never a good idea if you can avoid it. If you’re strapped for cash, it’s almost always better to seek help from your employer, family, church, bank or credit union.

But if all else has failed and you find yourself trapped in the vicious cycle of payday loan debt, don’t panic or lose hope. Help is available, not only to tackle the immediate problem of paying off your loan balance but the long-term issues of budgeting and managing your finances so that you never have to turn to a payday loan again.

Working with a reputable nonprofit credit counselor has the added benefit of providing guidance on building and maintaining healthy credit through tools like credit monitoring and credit reports, important building blocks to financial health. That, more than anything, is the key to escaping the payday loan trap, and making sure you never fall into it again.

About The Author

Max Fay

Max Fay has been writing about personal finance for for the past five years. His expertise is in student loans, credit cards and mortgages. Max inherited a genetic predisposition to being tight with his money and free with financial advice. He was published in every major newspaper in Florida while working his way through Florida State University. He can be reached at [email protected].


  1. Bennett, J. (2019, April) Fast Cash and Payday Loans. Retrieved from
  2. N.A. (2017, June 2) What is a Payday Loan. Retrieved from
  3. Mangis, L. (2019, April 5) The Best Way to Handle Payday Loan Debt. Retrieved from
  4. N.A. (ND) Understanding Best Practices. Retrieved from