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Help for Payday Loan Trouble - The Bills.com Blog
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Help for Payday Loan Trouble
Question: I took out many payday loans to cover unexpected medical bills and now cannot pay my monthly bills because of the payday loans! What can I do? Will they negotiate or wait for payment if I can't pay? I am about to lose my car. I can't pay the loan fees and keep putting off my regular bills. Help!
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 of the 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.
I would quickly tell you, however, to pay on your car first and then your payday loans after you have paid for anything that is secured (and could be, consequently, repossessed).
You can get out of the payday loan 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. Whether or not the lender will negotiate a repayment plan depends on the lender and your state’s law regarding payday loans. I encourage you to contact the lender to explain your situation and request assistance in repaying these debts.
Hopefully, one of these options will work out for you so these loans do not go into default. Whatever you decide to do, you should not place priority on paying the payday loans over making your car payment. If your vehicle is repossessed, you will likely be stuck with a large deficiency balance, meaning you will still owe money on the vehicle even though you no longer have the car. Making your car payment should definitely take priority over paying these payday loans, as losing your car will likely be detrimental to your financial situation.
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!
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1. Posted by robin williams on Wednesday 12th March 2008 07:56
i need to contact my lenders to work out another option of paying off my debt. the problem is i am having trouble is i don't know exactly how to word it. any ideas or suggestions would be appreciated.
2. Posted by Bill on Wednesday 12th March 2008 08:51
Try this sample letter, but fill in the blanks with the facts about your situation. DO NOT MAKE STATEMENTS THAT ARE NOT TRUE. January 15, 2006 (Creditor Address) Dear (Representative Name), I recently spoke with you regarding my past due account with your company. As I stated, I am currently experiencing financial dfficulties and am unable to pay the account in full. While my income is severely limited due to (insert your reason), I would like to honor my commitment to pay this debt. I am proposing a settlement offer of ___% of this debt. Based on this settlement amount, the debt would be paid in full with the amount of _____. If you are willing to accept this settlement proposal, I ask that you report my account as paid in full and delete any negative information that has been reported to all three credit bureaus. Please let me know of your decision as soon as possible so that I may facilitate sending the final payment. If you need to speak with me or have any questions, please feel free to call me at (phone number). Sincerely, John Smith * Make sure to use your own personal information and tell your story. This is just a sample of how you can format your letter