Payday loans are intended to be quick cash in the case of emergency but, they come with extremely high interest rates and many risks. Writing a postdated check through an employer is the most commonly used method of providing payday loans. Regardless of the loan reason or method, there are almost no acceptable excuses for not paying a payday loan.
Payment of payday loans is normally expected at the time of the borrower’s next paycheck. By failing to pay a payday loan, you may face the consequences of additional finance charges and returned check fees in addition to the owed loan amount. Or even worse, the lender can garnish your wages or take you to civil court.
Start by researching comparison reviews on the Internet to be sure you’re choosing a highly recommended lender. Use a reputable company with a successful business record. If you’re using your employer to obtain a payday loan, keep in mind that not paying back the loan could result in the loss of your job or having your future paycheck garnished.
Additional finance charges with absurdly high interest rates quickly cause a small loan to balloon into a huge debt. Lenders are known to charge a rate of 15% interest or higher per week. Extreme penalty fees such as for a returned check due to insufficient funds will likely be charged. Fees ranging from $20-30 and up can be charged each time the check is returned. Some lenders charge a penalty fee each day the loan is not repaid. In most states, lenders are not allowed to initiate legal action for a bad check but they can file a complaint in civil court.
Turning your debt over to a collection agency made be a lenders initial reaction but they could quickly choose to take stronger legal action. They can garnish your wages or repossess your purchases made with the loan. If the loan amount is large enough, the lender can even have a hold placed on your assets or place a lien on your property, so be sure to read the fine print of the loan contract.
Never take out a new payday loan to repay an old one. This only increases your current level of debt and does nothing to benefit your loan predicament. Even though a payday loan is commonly used in case of emergency, they are not recommended if you’re already in debt and know you won’t be able to pay back the payday loan.