How to Get Out of Payday Loan Debt

Defaulting on a Payday Loan

August 9, 2019 by marvin

Payday Loan Default Because life is full of emergencies, sometimes we find ourselves in need of a short-term loan to help with our immediate financial needs. As with traditional, long-term loans, payday loans must be paid back over a certain period of time. Defaulting such loans can lead to certain consequences.

What is a Payday Loan?

A payday loan is an unsecured, short-term loan. This is a loan that is taken to help one handle an emergency that can’t wait for the payday. A payday loan lender will require the borrower to have a steady source of income. Access to bank statements by the lender may be required.

Consequences of Defaulting a Payday Loan

Defaulting happens when you can’t pay back your loans on time. The consequences of defaulting a payday loan are as dire as the other loans. Failing to settle one’s payday loan can lead to several consequences, such as:

Your credit score could drop.
Your loan could get turned over to a debt collector.
Your wages may be garnished until the loan is paid back in full.
You may be subject to extra Fees and Interests. Any additional fees and interest will accrue as the payback period extends, thus adding to the original amount of the loan.

What to do if You Can’t Repay a Payday Loan

If you haven’t raised enough money to pay your payday loan on the scheduled time, you must try and do so as fast as possible to avoid future consequences. You can do this by negotiating with your lender to renew or extend your payday loan. This may require additional charges and must be done before the last day your loan is due.

For more information on payday loans, click here.

What Happens If I Don’t Pay Back a Payday Loan?

August 20, 2019 by marvin

There are several things you can expect to happen if you fail to repay a payday loan on time.

Bank Withdrawals: If you’ve given lenders access to your bank account, they will immediately initiate automatic withdrawals until the debt is repaid. Charges may be broken into smaller amounts to collect whatever money is in your account.
Collection Calls: Whether or not bank account access has been granted, lenders will begin calling to collect on the debt. Anyone you used as a reference on the loan documents may also be called to help locate you. However, lenders cannot identify themselves or your loan details to your references.
Negotiation: When possible, negotiate repayment terms with the lender. Typically, lenders would much rather collect money directly from you rather than selling your debt to an outside collections agency. Start by offering 50%, or as much as possible of what you owe to settle the debt. Just make sure to get the agreement in writing.
Court Summons: If you are summoned to court for a defaulted loan, be sure to show up to your court date. Never ignore a lawsuit — no matter how small the original loan amount. A failure to show will result in an automatic win for the lender, which means the court can begin to collect the money you owe on behalf of the collections agency through property liens, bank account levies, or wage garnishment, depending on state laws where you live.
Other Options: If you simply cannot repay your payday loan, consider other options such as community assistance programs to help with everyday expenses, credit and/or bankruptcy counseling, or legal aid.

For more information on payday loans, click here.

What is an Installment Loan?

August 23, 2019 by marvin

An installment loan is a loan for a specific amount of money that is repaid over time by a set number of scheduled payments. Installment loan payments combine the principal loan amount with an interest rate. The loan term may be only a few months or as long as 30 years. As you make payments, the loan balance lowers. Installment loans are an alternative to payday and title loans, which require repayment of the entire loan all at once.

Examples of Installment Loans

Many traditional consumer loans are installment loans that are repaid over time by regular payments of principal and interest. A few examples of installment loan types include mortgage loans, home equity loans, student loans, and car loans.

How to Apply for an Installment Loan

To apply for an installment loan, you will need to be at least 18 years old and have a valid ID, a steady source of income, and an open bank account. Depending on the state you live in and where you choose to borrow, a lender will consider factors such as your current income, your ability to repay the loan, your credit score, and your debt-to-income ratio. Your debt-to-income ratio is calculated by dividing the total amount of your bills by your monthly income.

Once you’re approved for a loan, your repayment schedule will be determined. You will pay a specific amount periodically (often monthly) and accrue interest at a daily fixed rate. Your loan principal and interest will be paid back over a scheduled period.

Can I Go to Jail for Not Repaying A Payday Loan?

August 27, 2019 by marvin

If you have defaulted on a payday loan, or are concerned that you will default on one in the near future, you may be concerned that you will go to jail for not paying the loan. However, in the United States borrowers who are not able to pay back a loan cannot be jailed for failing to by a debt. It is against federal law. There are bankruptcy and federal laws that enable borrowers who have defaulted on their loans to file for bankruptcy protection.

However, a creditor may pursue collection through legal collection methods, which may include civil courts. You could see some jail time if your lender successfully sues you for assets, such as a lien on your personal property or garnishment of your wages, and you refuse to comply. Failure to comply could include consequences as dire as jail time.

If you are summoned to court on a defaulted payday loan, be sure to attend your court date. Failure to do so will result in an automatic win for the lender and consequences for you.

It is always in your best interest to attempt work with your lender as soon as you know you will be unable to repay your debt to avoid defaulting on a loan. Typically, lenders would much rather collect money from you rather than selling your debt to an outside collections agency or engaging in costly legal services.

15 Things Debt Collectors Can’t Do

August 30, 2019 by marvin

Debt collectors have a reputation of doing anything to collect on an outstanding loan. The federal Fair Debt Collection Practices Act (FDCPA) was enacted to make it illegal for debt collectors to use abusive, unfair, or deceptive practices when they collect debts. It’s important to know your rights when debt collectors call on an outstanding payday loan or other loan debt.

Debt collectors can NOT:

Harass you.
Lie to you.
Engage in unfair practices.
Come to your workplace.
Call you repeatedly.
Pretend to work for a government agency.
Arrest you for debt.
Publish your debt details.
Call you before 8 a.m. or after 9 p.m.
Pursue you for a debt you do not owe.
Threaten you.
Misrepresent the amount you owe.
Attempt to collect interest or other charges on top of the amount you owe.
Contact you by postcard.
Discuss your loan amount details with anyone but you or your spouse.

What if a debt collector doesn’t follow the rules?

If a debt collector is contacting you, you should know that you have federal and state-protected rights. According to the FTC, you can report any problems you have with a debt collector to:

Your state attorney general’s office
The Federal Trade Commission
The Consumer Financial Protection Bureau

Individual states have their own set of debt collection laws that may be different from the FDCPA. Your attorney general’s office can help you understand state laws and determine your rights under your state’s law.

Answers to Common Debt Collection Questions

September 6, 2019 by marvin

There are many myths and legends regarding the behavior of debt collectors and the way they collect. Below are several concerns most often cited by individuals regarding debt and collections.

Does a collection ever go away?

No, a collection report does not go away. You will receive a collections report on your credit for the debt but even after that report expires you will still have to pay it back. The report will remain a part of your financial history so when applying for loans or lines of credit you will have that mark as a negative factor until the debt is paid.

How long before debt is written off?

Debt is never “written off.” While the collections report will be removed from your credit after 7 years, it is still a debt you need to repay. After the 7-year period ends the collections report expires and no longer has a negative effect on your credit. However, it will still be a debt you will have to repay.

Can a debt collector refuse a payment plan?

Debt collection agencies are not legally obligated to accept payment plans. They can refuse any payment plan for any reason. The biggest concern you need to have about your debt is it being sold to a collector that does not have an interest in setting up a payment plan or reduced sum. Though it may be in the best interest of certain institutions, a payment plan can be a way to avoid having a debt collection report drop your credit score for 7 years. A collection report can cause a drop of 100 points or more on your credit during this time. As long as you are making regular payments, there will be no collections report associated with your credit. It is very important to take advantage of one if the opportunity arises.

This should help you understand how debt collections operate. It is important to every person’s financial health to be sure to stay in control of their debts and take advantage of any payment opportunities or reduced sums before the debt is sold to a more aggressive collection agency.