Due to the current state of the job market and the economy of the nation as a whole, many people are struggling to make day to day ends meet. As a result, more consumers are turning to payday loans just to get by from one paycheck to the next. While one payday loan may be helpful in the event of a true emergency, in many cases one loan turns into several until a vicious cycle of debt has begun.
Payday loans are short term loans consumers can take against their regular paycheck. Most agencies will qualify applicants for the loan immediately but with a very high rate of interest. While the cash may be fast, the amount paid back is nearly double what has been borrowed. For those barely able to survive on their salary, taking a hit when repaying the payday loan can cause debt to quickly spiral out of control.
When Too Much Is Too Much
When you have to get an additional payday loan in order to afford paying back the initial loan, you are already facing financial difficulties ahead. In some cases, consumers will have multiple payday loans at the same time and will not be able to meet the repayment demands on all of them. At this point, a negotiation or settlement of the payday loans may be necessary.
Here are some things you need to know about settling a payday loan when payday loan debt gets out of your control:
Know What You Owe
Whether you have a single payday loan you can’t afford or several, you have to create a visual of what you owe and where. Make a list of the payday loans you have and how much total amount is due to the lender including interest charges. Notate what amount you have already paid on each loan. You will also need to identify which loans were conducted online and which were completed in physical store locations. This will matter because negotiations for loans online differ from those transacted in a brick and mortar location.
Check the Laws
Different laws that vary by state can affect how you negotiate the settlement of a payday loan. Nearly every state has requirements for payday lenders to be licensed. Check to see if the law where you reside also require Internet-based lenders to be licensed as well. If the Internet loan company does not have the proper licenses you technically do not have to repay the loan. However, it is still a legitimate debt you owe and you should face it head on.
Those lenders who are willing to lend amounts of money over what is permitted by law in order to charge more interest may give you a loophole towards negotiating a settlement. There are laws that dictate how much a lender can provide in a payday loan. If they have gone above the limits of the law in your state, you may have the ability to successfully negotiate a settlement at a lower amount.
Establish Payment Plans
If you are having financial difficulties and can’t afford the payment as initially set up, check to see if the company you received the loan from is a member of the Community Financial Services Association of America who is the agency responsible for regulating payday lenders. The CFSA requires that those lenders establish payment plans for borrowers who are having financial hardships. You must file a request to settle the debt without having already defaulted on it.
Remember that defaulting on a payday loan before trying to negotiate a settlement agreement, you can still be sued for the amount due plus accumulating fees and interest and an associated legal costs. The same is true if you attempt to close out the bank account where the payday repayment will be withdrawn on your next payday.