Have you ever been in a situation when you need some extra cash to solve your problems? If you are a person that lives in a modern world the answer is likely to be yes. The Pew Trust Research shows that 12 million Americans get payday loans every year. The reasons why people take loans can be as trivial as paying rent or covering electricity bills. Once you got the needed amount of money, the crisis seems to end. But is it really over?
The real nightmare of any borrower is not to be ready to repay the debt when the payday comes. Is it really that scary? What happens to people who fail to pay? And more importantly, what should a borrower do? Here is some information that may help you to overcome this unpleasant situation and get back on track.
How Payday Loan Default Occurs
A payday loan is a sum of money taken from a lender for a short period of time. Its amount is usually not higher than 500 dollars. The loan has to be returned within two weeks or on the determined date. Payday loan can be taken online or in person.
When the payday comes you have to repay the loan yourself or the lender will withdraw the amount from your bank account. If there are not enough funds on your balance, the lender is likely to keep trying to charge you. If the attempts are not successful during 60 days, the case will be turned over to the debt collectors. They usually use more aggressive methods to get the money back.
The most dangerous thing about payday loans is that they are often not taken seriously. The requirements are simple and a small amount of money seems easy to repay fast. By the end of the period, a borrower may not manage the budget right and fail to repay the debt. Another important thing is to remember about fees and interest. The total cost may differ a lot from the payment amount. It is important to read all the agreement details provided by a 24/7 payday loan lender to avoid misunderstanding.
What Are the Possible Consequences?
The lender and collector agencies may use various ways to return the money. You should distinguish real consequences from threats. They may take the following actions:
#1 Bank Withdrawals
If the access to your bank account was allowed by a loan agreement, a lender will try to take the loan sum from your balance. In case the payment does not go through, a lender may attempt to make smaller charges to return any possible amount of money. Remember that the bank also takes fees from you for any failed charges.
#2 Calls and Letters
You are also very likely to start receiving calls and emails from a lender. He may contact you at work and call your friends or relatives, especially those who you mentioned as references. According to the law, the lender can only ask about your location. The details of your debt situation cannot be revealed.
#3 Jail Threats
Despite what you may hear, a payday loan default is not a crime. Any jail threats a borrower may use are not legal. However, they should not be ignored. Any arrest threats should be reported to your state attorney.
#4 Lawsuits
Even if the amount of debt is small, the collection agencies may summon borrower to the court. The lenders have chances to win if the borrower does not come to the court. It may lead to wage garnishment and property liens. Thus, lawsuits should not be ignored. When the borrower is present, the lawsuits are often dismissed due to lack of proofs.
How to Deal with Payday Loan Failure to Repay?
Dealing with payday loan default is unpleasant and requires immediate actions. The longer it lasts, the more troubles it brings including bank fees and growing interest rates. Here are a few ideas on how to get out of this situation.
#1 Learn All the Loan Details
In order to get out of your debts, you have to face them and check all the information. Find out the exact amount you currently owe and calculate interest rate to know what to expect. When the situation is clear, it is easier to plan further actions. If you have a few loans, start repaying the ones with the highest interest rates. It will not let your debt to grow fast.
#2 Consult an Expert
The useful recommendations from a non-profit specialist will help you to think through your further actions. You can get the help from the legal aid center, bankruptcy attorney or credit counselor. A specialist’s point of view will allow you to resolve your loan issues faster.
#3 Ask for Payment Plan Extension
If you realize that you will not be able to pay the loan in time, ask your lender for an extended payment plan. Keep in mind that you can do it before the last day of your due date. In case a lender agrees, you will have to sign an amendment. Be sure to check all the new terms and interest rates. It will not solve the problem completely, but you will get some more time to repay your loan. In some situations, that is exactly what a borrower needs.
#4 Take Loan with Lower Interest Rate
The worst part about payday loan default is a high-interest rate that makes your debt to grow. Taking a personal loan with a lower interest rate and longer repayment period might slightly improve the situation. You will repay your payday loan and get some more time to find the money. It will also save your credit record from being hurt by payday loan debt.
Summing Up
As you can see payday loan default is not that scary as it may seem. It is unpleasant and troublesome but there are ways to resolve this issue. The most important thing is not to ignore the problem. The payday loan debt will not magically disappear if you forget about it. The consequences will be less unpleasant if you face the issue and take actions.