A payday loan is a short-term business financing that has a high interest payment. Whenever you need loan forgiveness, you can talk to a licensed credit counselor and get the help you need.
A payday loan is a short-term business financing alternative that is based on the debtor’s income and credit profile. In most cases, they are advertised as a way to finance the unexpected purchase that a business might experience in a couple of days before the month ends. Unlike other types of business or personal loans, payday loans are taken out over days instead of years, and they can be used to cater for emergency expenses until income arrives.
With a payday loan, it is easy to get into a debt trap since they have high interest rates. You can easily depend on this type of business financing, and roll over one loan several times to postpone paying back. Easy accessibility of the loans results to an expensive habit and the cash you use to maintain those loans will hinder you from getting back to your feet. Payday forgiveness is one of the approaches that can help you get rid of payday loan debt.
What happens if you fail to repay a payday loan?
Failing to repay your payday loan can cause a barrage of bank overdraft charges and endless collection calls. This will also hurt your credit rating, lead to income garnishment and lawsuit.
Here is what to expect once you fail to repay your payday loan.
- Bank withdrawals and collection calls
Creditors who specialize in giving out the payday loan will never be lenient to you once your debt is due. They would initiate an automatic withdrawal from your bank account if you had allowed them to access your account in the loan agreement. If the withdrawals fail to go through, they might break the charges into small portions so that they can get access to any amount available in your account.
Each unsuccessful attempt might bring a bank charge against you and the efficacious debit attempts will drain your account, making other transactions to bounce. This will lead to more charges.
Apart from that, expect to get endless calls from the lenders and get letters from their lawyers. They will also contact your family members and friends you presented as references when you obtained the loan.
- No jail term but expect to get more threats
Defaulting a payday loan is not a crime and it is unlawful for the creditor to threaten the borrower with a jail term or even arrest. However, some creditors have thrived in employing bad-check laws to file criminal grievances against debtors, with the jury speciously rubber stamping the lawsuits.
Any person that has been threatened with jail term or detention for failing to repay a payday loan should call the office of the attorney general in his or her country. Do not flout a court order prompting you to appear before the judge even the case was filed erroneously.
- An opportunity to negotiate
A smart creditor will rather get the debt directly from you instead of selling your debt to an external collection company. The third-party debt collection organization might pay less amount when buying your debt. If it is possible, you can begin repaying your loan by giving out 50% of your loan. You can tell your creditor that you can’t pay the loan and you are contemplating to file for bankruptcy. Once you mention being bankrupt, they will be serious since the lender know bankruptcy means you have nothing.
- Court summons
The majority of lawsuits against debtors are for a small amount and in most cases, the lenders will win the lawsuit because the borrower fails to appear before the court. For this reason, you should not fail to attend to court summons as this will help you get a payday forgiveness.
- How to get out of a payday loan cycle
When you have been trapped in a cycle of payday loan debt, there are numerous ways to get out. If you had secured a payday loan and failed to repay by the due date, you might have decided to borrow another just to push you. Note that this will result in an additional loan with extra charges, possibly followed by another and with time, the debt starts to accumulate. If you find yourself in the same scenario, then there is new hope for you. With a proper strategy and appropriate planning, you can get out of the payday loan cycle and avoid the high cost of the loan.
Reasons for taking out several payday loans
Recent research has indicated that many debtors end up paying excess cash on charges than what they get from payday loans. This is because payday loans are paid back within 14 days. This gives the debtor little or no time to get enough cash to repay the loan. That is how a payday loan traps business owner in debt. The Consumer Financial Protection Bureau approximates that more than 85% of payday loans result in the debtor obtaining another loan to offset the previous one. In this case, you will need loan forgiveness since these short-term loans are costly and you might not get the best means to repay them.
- Handling your debt
Consolidating your debt is one of the things that can help you get out of the payday loan cycle. Since payday loans come with high interest rates, you will need to stop getting more loans and merge all your debts into one big loan that has low and manageable APR. If you have already spoiled your credit score and you need to consolidate the debt, your best alternative is to obtain a business financing from a credit union or get some help from the relatives or close friends. The alternatives to consolidate the loans comprise credit unions, balance transfer credit cards, and faith-based corporations. You can as well ask some help from friends and relatives.
- Personal loans from a credit union
Credit unions are owned and managed by its stakeholders. For this reason, their terms and conditions are flexible and the business financing they provide more accessible to individuals with bad credit and history of debt. The credit union might look at more than just your credit rating when deciding to approve your loan.
- Faith-based agencies
Numerous faith-based agencies are coming up in the lending industry to assist those struggling to get out of the payday lending debt cycle. The organizations agree to pay your debt in full such that you can repay them the loan over a set duration, always without any charges or interest.
- Balance transfer credit cards
This kind of transfer allows you to move your debt and pay small to no charges on it for a set duration. For instance, a balance transfer credit might give 0% APR for ten months. That is to say that you will get a 10-month break from paying the loan interest as you pay back what you owe. To use this alternative, make sure you have a balance transfer credit card that allows you to transfer your payday loan debt. When looking for the best card providers, you can opt for the one that provides longer zero interest duration such that you will have more time to repay your loan. Even though you will need an excellent credit rating to get the best balance transfer credit card, you might be able to get approved for some balance transfer credit cards with bad credit rating.
- Ask friends and family for help
Once you explain your situation with one of your relatives or close friends, they might be willing to offer some financial support that you might not need to take out more loans. This kind of personal loan has the benefits of no interest rate attached.If the individual you speak to cannot give you the cash, you can request them to co-sign a loan with you. However, you need to prove that you have the capability to make the monthly payments since this is risky for the cosigner and some might want to avoid putting their credit online.
- Prepare a plan to get out of debt
Even though consolidating your debt us a better way of reducing your interest and hence the total cost of the debt, it can’t work on its own. Debt does not arise from anywhere. If you try to evaluate your finances, you will get structural issues that made you look for the payday loan. Credit counseling and budgeting are effective means to create financial literacy and know how debt works. The moment you understand how to handle your spending behaviors and lower the expenses of your daily life, you will enhance your credit and lessen the possibilities of being trapped in a cycle of payday loan debt again.
- Prioritizing debts with high interest
The moment you know the loan amount and how expensive is each loan, you can plan on which one to settle first. Start by repaying those loans with high interest and then move to the debts with lower interest. Note that this will assist you to reduce the total amount you will need to pay at the end. With the charges that are equivalent to 3-digit APRs, payday loans will be your most costly debts. Moreover, you will have to wait for your next paycheck to have the complete amount or you will face charges to renew the loan. For you to get loan forgiveness, you need to reconstruct the debt or find effective ways to get the full amount immediately.
- Request for an extended repayment schedule
The manner in which payday lenders structure their payday loans makes them expensive and hard to pay. For this reason, it is important you get an effective way to restructure your payday debt. In this case, you can request to negotiate a payment schedule with your lending institution. Try to persuade the lender to give you an extended payment plan (EPP) that will split the loan into small installment monthly payments. This will allow you to have enough time to pay back the payday loan and you won’t face any extra charges or interest rates. You might be required to sign a fresh loan agreement with the terms and conditions of the extended repayment plan. Ensure that you go through it carefully and understand the terms before signing the agreement.
How to Get Rid of Payday Loans and Escape the Cycle
As a business owner, you might be tired of obtaining loans from payday lending institutions or having numerous payday loans that have trapped you in debt. While in this situation, the only thing to think about is how to get rid of the payday loan debt ASAP. Well, worry not as this post will show you how to attain that in simple steps. Your finances will appreciate the efforts you made for many years to come since paying the monthly bills will be easy. While it is easy to obtain a business financing from a payday loan lender or use an online lender, you might feel trapped in a continuous cycle of borrowing and need some payday loan assistance. With some careful planning, you can effortlessly get rid of the cycle of continually borrowing. Here are some of the steps to help you put a permanent stop to this cycle.
- Establish a personal budget
Putting together your realistic personal budget that comprises all your weekly and monthly expenditure and other financial obligation is the first thing to do. This will allow you to understand what you can repay the lender. Rushing to repay your loan one or two months early may bring more financial issues on future.
- Call the payday lender
the moment you have identified the amount you can afford to pay every month, contact your lender or lending institution that and tell them that you will not be able to repay the complete amount that was agreed-upon. Notify them of what you can manage to give, how frequent they will get the repayment and request for their understanding with your modified repayment plan.
- Consider creating a new bank account
Keep in mind that when you obtained the payday loan, you agreed to let the lending institution deduct payment directly from your bank account. If you are uncertain that they honor the modified loan payments terms, it might be important to open a new bank account to prevent the stress that a debit for the entire loan amount will be deducted from the account next time you get a paycheck.
- Get prepared for emergency expenses in advance
The moment you complete repaying the loan, go through your budget again with an opinion to balance it better by saving some cash every month for yearly expenditure. Don’t forget to save some cash for emergency purposes since some things just happen unexpectedly.
What are your rights with payday lending company?
Before you start fighting against the payday loans, you need to know your rights as a borrower when you enter the loan agreement. You need to understand how the payday lenders get away with losing money from debtors and what the law is doing about it. Consumer financial protection Bureau states that the lending companies are not legally bound to give loans at the lowest rates. However, the legislation requires lenders to disclose the cost of the business loans in terms of yearly APR.
Even though the exposé of the cost does not reduce the worries about the predatory structure of this business financing alternative, payday loans are recognized as an instant solution to a financial emergency. However, payday lenders understand that their business model is designed to keep consumers caged in debt the cant pay back.
Fees and interest
It is essential to note the language payday lenders use when structuring these business financing alternatives. These lenders get a chance to charge a high amount of interest because in the real sense, they are not taking the interest but a fee.
Features of a payday loan
- These are short-term loans that are provided in a small amount. In many countries, $500 is the set limit even though it can range above or below this figure.
- In most cases, a payday loan is paid back in one installment on the debtor’s following payday or once income comes from other sources. The deadline for a payday loan is usually 14 to 30 days from the date the credit was obtained. The due date is agreed-upon in the loan agreement.
- When paying back the loans, consumers are required to write a check for the complete amount and it should be postdated. The payment will include the fees, or the consumer can authorize the lender to automatically deduct the cash from the bank account, credit union account or even the prepaid card account. In case you fail to pay back the loan on or before the deadline, the lender will cash the check or automatically debit the funds from your account.
- The lender does not consider your capability to pay back the loan as you solve other financial problems.
- The loan amount can be offered to you by cash or check, automatically deposited to your account or can be loaded on your prepaid card.
What Are the Dangers of payday loans
Payday loan firms can make their clients to become dependent on them since they charge higher fees and need a quick repayment of the loan. This condition makes it hard for the debtor to pay back the loan and still cater for other financial obligation. The majority of debtors obtain those loans from multiple different lenders and this makes the situation worse.
Once you depend on those loans, you will be left with less to pay for other expenses and you might end up spending everything in your paycheck. Even though they provide an instant financial solution, the loans don’t offer a long-lasting solution for the financial problems. once you think that you need a payday loan, evaluate your financial condition to get means to change your budget and plan your finances to determine if you can free excess cash.
Even though it is enticing, obtaining a payday loan for non-emergencies things like a vacation makes no sense that saving the cast over time.
Break the borrowing cycle
If you always depend on payday loans, you better stop now. You can pay the loan in small amounts so that you can reduce the balance and avoid taking another loan to stop the cycle. Ensure that you can handle the basic needs at home and use the remaining amount to pay off the loan. Find out if the lender will allow you to pay the loan in two installments instead of one to make the repayment easy.
You can also stop some spending until you repay the loan in complete and try to survive with your paycheck without securing another payday loan.
Avoid needing a payday loan
Proper budgeting and emergency finances can help you avoid taking out payday loans. In most cases, wanting a payday loan is the same as having constant late payments or overdraft fees from your financial institution. Planning for expenditures in advance is essential since it helps you avoid experiencing these financial woes.
Forgiveness of Payday Loans – Final word
If you need assistance and guidance to handle your payday loans, do not hesitate to talk to a reliable profit credit counseling agency. They will help you get the payday forgiveness you seek and feel confident with the solid strategy that allows you to manage your cash. Their assistance will comprise the payday loan relief and you will also get professional advice on how to pay back your loans effortlessly.