Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
Payday Loan Settlement
You are here because you pushed the button for payday loan settlement. That’s great! We hope we can help. Payday loans are extremely popular in America for a number of reasons: they are quick, they don’t require a credit check and they can be acquired online. For as efficient and useful as they may seem, they can also lead to a slippery slope of unwanted debt. If the debtor pays back the loan late or misses the due date altogether, the penalties and fees can be detrimental.
Payday Loan Consolidation
There are programs like payday loan consolidation (also known as payday loan debt settlement) that are designed to reduce the amount of payday loans you have to a more realistic amount that fits your income level. The process is simple: once you select a payday loan settlement company, they will go over the fees with you and find a monthly amount that you can pay into a new savings account that they will open in your name. You will deposit a certain amount into that account each month, and when it reaches a set level your payday loan settlement company will start to negotiate settlements with your creditors.
The payday loan consolidation company will aim to reduce your balance with your creditor in order to “settle” the account. Once they have agreed upon a settlement amount, the payday consolidation company will begin to pay the creditor with the money you have deposited into the new savings account. Once the creditor has received the funds, they will mark the account as settled and report it to the credit bureaus as such. This process can take anywhere from 6-18 months, depending on the amount of debt you have and the amount of money you can deposit into the savings account each month.
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Payday Loan Companies
Like we mentioned earlier, payday loans can be extremely efficient. However, if you are thinking about applying for a payday loan, make sure you know what you are getting into. In some cases, payday loan companies charge up to 400% interest on loans that are not paid off on time. Make sure you read the fine print before signing up for any payday loan and do not take one out a loan if you don’t think you can pay it off with your next paycheck. Once those penalties and fees hit, they continue to accrue each day and can quickly become a mountain of debt.
Payday Loan Help
When is it that you really need payday loan help? Here are a few signs you can look for:
- You get endless phone calls, email or letters from a payday loan company requesting payment from you.
- Your wages are being garnished by a payday loan company
- You have been summoned to court by a payday loan company
If you are dealing with any of these 3 scenarios, it may be time to consider finding payday loan help. Fill out our online evaluation or call our toll-free number for more information today.
Payday Loan Consolidation Companies
If you have decided that you do need payday loan help, then the next step is to find the right payday loan consolidation company for your situation. A good payday loan consolidation company will provide you with a few things upfront such as a standard timeline of how long they anticipate your settlement will take, how much they think they can reduce your balances by, and their fees will be. If you are not given this information, then there may be a reason to be wary. Don’t hesitate to ask questions. Your knowledge of payday loan debt consolidation process will help you stay confident and stress-free. Payday loan consolidation companies have the same goal as you: reduce the overall debt.
Payday Loan Debt Assistance
If you are dealing with payday loan debt amounts that seem like something you will not be able overcome alone, seek out payday loan assistance as soon as possible. You are not alone as thousands of people out there are struggling with payday loan debt and are asking for help. Payday loan debt consolidation companies can be extremely beneficial if the debtor is proactive and committed to getting out of debt. Fill out our no-obligation evaluation to see how payday loan debt consolidation could help you or call our toll-free number and speak with a representative if you have specific questions.
Debt cycle – what it is and how to break out
Payday loans may seem like a good option if you are strapped for cash, but it’s quite often very easy to get caught in a never-ending debt cycle. Paying off your payday loan as soon as possible is usually your best option. Payday lending companies are infamous for implementing a wide variety of questionable tactics to keep you in debt.
Researches showed that 33% of surveyed people who got into debt problems took out a payday loan, 47% have taken out 6 or more payday loans in the last 12 months. Over half of those owe more than $500 to their payday loan lenders. 61% have taken out more than one payday loan at the same time and 69% don’t even know the interest rate of the payday loan they’ve taken.
These numbers are proof that taking out a payday loan is much riskier than you may think it is. So if you’re already in a payday loan debt cycle, don’t panic. There are things you can do to manage your debts and get out.
Stop the borrowing cycle
The trap that many people fall into is simply not being able to afford it in the first place, but feeling there’s no other way but to take out another one…and another then another.
You need to stop the cycle. Constantly taking out one payday loan after payday loan may seem like a fix to your problems – well it’s not. Stop taking out loans and you’ll stop slipping into debt.
Cancel the CPA loan payments
A payday loan is a non-priority debt. That means it should only be paid when you’ve got money to spare after you have paid for priorities like mortgage, rent, food, living costs, household bills. If paying back the payday loan means that you’ll be short of money to pay for priorities, then you should put a hold on it.
When you apply for the payday loan, you give your card details to set up a continuous payment authority (CPA). This is how most payday loan company take their repayments.
It’s a direct link to your bank and the payday lender can take the money whenever they want. If there’s not enough money for you to cover the full repayment, they can try over and over again.
Recognize the debt trap
Many people get trapped in a never-ending cycle of payday loans because they are unable to pay back the original amount of money. Instead, they pay a small fee to renew the loan for another term.
- Payday lending companies normally charge extremely high interest rates which can translate to around 400% APR. This means the amount you owe can add up very quickly if you don’t pay off the loan right away.
- Most payday loan lenders will require that you give them a postdated check for the amount owed or authorize them to withdraw money from your checking account when your payment is due. If you don’t have money in your account, you will probably be charged by the lender, as well as an overdraft charge by your bank.
Understand the true cost
You have to make sure you understand exactly how much interest is being charged, when your payment will be due, and what will your options be if you can’t afford to pay before you take out a payday loan.
- Making a chart or spreadsheet that illustrates how much you’ll owe if you continue to renew the loan may prove to be helpful. It will motivate you to pay it off as quickly as possible.
Pay off the loan in full if possible
Payday loans normally must be paid back in full on your next scheduled pay day. This generally means you have two weeks to pay the loan back. The most efficient way to stop a payday loan from growing is to simply manage to pay it back in full immediately. If you pay back the loan the right away, your overall fees will not be very high.
- Try to save money by cutting back on non-essential expenses like dining out and entertainment. You can also raise extra money by selling items that you no longer need or use, work overtime or get a second job.
- If necessary, ask family and trusted friends to help you get out of the payday loan cycle by lending you some money. You can pay them back with regular installments and you will no longer have to worry about growing interest and fees.
Pros and cons of a possible loan consolidation
When you make your plan to get out of deb\0t, weigh the pros and cons of a possible payday loan consolidation. Consolidating loans means that several outstanding loans will be merged into one big loan that is secured by your property. In other words, all your secured and unsecured debt are consolidated into one secured debt. You may be able to take out another mortgage on your home to secure this debt. However, it can be a very risky process and it’s not for everyone.
- Lower payments
- When you consolidate your loan, you can usually reduce the monthly payments your interest rates
- There are also tax advantages
- Possible loss of your home. If you cannot pay your new consolidated loan, you are running the risk of losing your home. The loan was secured by your house, so if you cannot pay off this loan, you may lose your home. That’s why debt consolidation can be quite risky and isn’t always such a good idea. It may be a good idea to work with a lawyer throughout the whole process so you can have access to professional advice with each step.
It is important to pay your payday loans back, but it is not more important than putting food on your family’s table or paying your rent..
- If you have other loans to pay off as well, such as credit cards, pay off the debt with the highest interest rate first. This will almost always be your payday loan. Make sure you continue to pay the minimum amount owed on your credit card so you don’t go into default.
Enquire about payment plans
Different lenders offer different payment plan options to customers who are unable to pay back the full amount they owe, so you may have to find out more about this option.