Ask Bill your personal finance question

Help paying off loans advice

I just took out some payday loans and need help paying them off. I don't want them to go into collections. What should I do?

I just took out some payday loans and need help paying them off. I don't want them to go into collections. What should I do?

Read full question
Bill's Answer
4.0
/5.0
(6 Votes)

Updated: Sep 24, 2014

Bills.com | Find Learn Save

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.

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.

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

3 Comments

Recent Best
1500 characters remaining
  • JT
    Aug, 2010
    Jim
    Every business needs a working capital source. At one point or another they will need an injection of cash MerchantFinanceConnection is Your source for Business Finance Solutions including Fast Cash, Merchant Cash Advances, Working Capital and Equipment Leasing. Discover today what we can do for you! Your Gateway to Business Finance
    0 Votes

  • BA
    Dec, 2008
    bill
    I believe that the legal rate of interest in Utah for consumer transactions is 10%.
    0 Votes

  • KM
    Dec, 2008
    Kent
    Is there a usury cap for UTAH
    0 Votes