All about payday loan default - The Bills.com Blog

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All about payday loan default

Question: Have over extended myself with payday loans, how do I get myself out of this mess? I have four loans.

Answer: These small loans, also called ?cash advance loans?, ?check advance loans?, or ?deferred deposit check loans?, are a frequent pitfall for consumers. A fee anywhere from $15-$30 per $100 borrowed is charged for an average loan of $300. With rates so high and the term ofthe loan so short there?s no wonder that a very high percentage of these loans are rolled over by the borrower again and again so that the accumulated fees equal an effective annualized interest rate of 390% to 780% APR depending on the number of times the principal is rolled over.

You can get out of this trap if you are a resident of one of the twelve states where this type of loan is illegal once the effective rate passes the usury cap in that state. Usury laws dictate the maximum interest that many lenders may legally charge. If the payday lenders follow their normal business model the loan will most assuredly pass the limit very early. New York State even has a criminal statute that sanctions the lender if the rate exceeds 25%. If you are in one of those states, the loan may be void, and you may be only liable for the principal amount borrowed. In addition, there are eight states whose payday loan regulating statutes require

lenders to set up an installment repayment plan if an account reaches the maximum number of rollovers allowed by law and the debtor declares that he/she is unable to pay the balance due. Such a repayment plan may help you in paying off these loans. You can find a summary of your state?s pay day loan statutes at www.paydayloaninfo.org , a website developed by the Consumer Federation of America. If you go to the same site and click on consumer help, you will find a comprehensive discussion of the best strategies of how to cope with and get out of the payday loan trap.

If you do not live in one of the states whose payday loan regulations favor consumers, the best solution would be for you to borrow the funds needed to repay these loans from a conventional lender or a family member or friend. Converting your payday loans to a conventional loan should allow you to repay

the loans within a reasonable time frame and at a reasonable interest rate. If you cannot borrow the funds to repay the payday loans, you may want to make a payment each month to pay down the balances. In some states, the interest on the loans will prevent you from effectively repaying the debts in monthly installments; if you find that to be the case, you should contact the payday lender to try to work out repayment terms that will work with your budget. Hopefully, one of these options will work out for you so these loans do not go into default.

Bills.com offers a wealth of information about payday loans on our Payday Loan Information page, available at http://www.bills.com/payday-loans/

I wish you the best of luck in repaying these payday loans. I hope this information helps you Find. Learn. Save.

Best,
Bill
www.bills.com

Also, make sure to get a free financial health check-up with Bills IQ!

User Comments

1. Posted by Jim Bergerson on Tuesday 4th March 2008 17:35

I live in california. How many times can a payday loan co put my check through the bank after being told there's no money there.

2. Posted by Nate on Wednesday 5th March 2008 08:26

Please refer to California State Information section of the site www.paydayloaninfo.org to get information on the status of payday loans in the state of California (http://www.paydayloaninfo.org/state_detail.cfm?id=CA). I think once you issue a check, the party has a validity of 6 months from the issue date to present the check. Most banks present the check twice; however, there are no laws that determine how many times a check may be resubmitted.

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