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Do you have some debts and need some quick cash to clear them off?
Many people may advise you to get a payday loan if you’ve got a job.
As convenient as it may seem, is it really a wise idea to get one?
The answer is no. It’s really easy to get into a payday loan but getting out of it, well, there’s where the challenge lies.
A payday loan is a real short-term loan.
Usually, the payday lenders who provide them operate from storefronts. However, more of them are choosing to conduct business online.
How does it work?
Before considering lending you the cash, the payday lender checks your income to confirm that you can repay the loan.
They’ll also verify your bank account so that once you qualify to get the loan, the green is deposited into the verified bank account.
An important point to note is payday lenders charge a particular amount of interest along with the loan. You’ll have to write a postdated check to pay the loan and the charged interest.
If a payday loan is a once-and-for-all thing, then that’s okay. On the other hand, if you use it to cater to your daily expenses and keep borrowing more, it’s only a matter of time before you become miserable.
If you’re in a payday loan debt already, don’t worry. You can get out of it. Here are some tips for dealing with payday loan debt:
1. Have a Chat With an Independent Debt Adviser
You want to stay out of debt and to avoid this, you need a professional advisor on your side. Finding one who suits your needs is difficult because not many have the skills. Sure, you may want to take the easy way out and go for free advisors.
Some financial or law firms provide expert debt advisors, that’s for sure. But not every one of these firms can be trusted. You need to do some digging around before making your choice.
If you’d like to go all the way and find an advisor on your own, here are top characteristics you should focus on as you search:
Check their Record of Compliance
Does the advisor follow the rules? Do they get a nod from a majority of regulatory agencies? If they do, they may be your perfect pick. Compliance records are one way to confirm that an advisor is legit.
Have a Look at their Track Record
Don’t rely on verbal performance numbers from them. They should provide detailed documentation for their historical returns. After all, they should know that you have expectations when you choose them.
Go for IARs and RIAs
Skip the hassle and narrow your search to Investment Adviser Representatives (professionals) and Registered Investment Advisers (firms). These registrations allow firms and professionals to offer their services at a fee.
They Should be Transparent
The last thing you need is some so-called expert feeding you false information or worse, withholding vital information. If they let you do most of the snooping, that’s a red flag that you’ve got to bounce.
2. No to a Loan Rollover
Picture this: your loan’s due date is next week, but you haven’t made enough cash to repay the loan, or you don’t have the money to pay it off.
Your first line of action might be to request your lender for a rollover. It’s convenient, right? You get more time to put your financial house in order, and you don’t have them breathing down your neck for the amount you owe them.
Apparently, a loan rollover is the worst move you can ever make. First of all, you need to pay the lender a particular fee so they can agree to extend your deadline.
Also, if you’re not able to pay the loan before the deadline, you may have to pay the same amount, or more, so that the deadline can be pushed forward once again. Combine those figures with the amount you owe, and you’re in for quite a headache.
Instead of taking part in that circus, do some preparation in advance. Make a deliberate effort to save some money.
Any extra money you get from work goes toward paying off the loan. Even if it means doing without simple pleasures such as eating out and buying yourself new stuff, do it.
Once that loan is out of your way, look for cheaper ways to get that extra buck. They’re literally at your disposal. From selling things you no longer need to asking for an advance from your boss, you’re spoilt for choice. Look for a money-making method that suits you and work with it.
3. Stop the Borrowing Cycle
If you’ve borrowed one too many loans and they’re now staring you straight in the face, stop borrowing more money. Not just from your lender, but from any source that requires you to pay back the cash.
Next, share your problem with your lender. Keep them updated on steps you’re taking to offset the balance.
If you’re up for it or they’re the friendly type, ask for their two sense on what you should do. Approach them humbly, but don’t let them take advantage of you or your situation. If you can get them to lower the interest you owe them, then go for it.
Come up with ways to raise money to clear the debt. Here are some simple techniques that you can try out:
- Ask your buddies or loved ones for cash. Agree with them whether or not you’ll pay them back before they can give you the money.
- Create a budget. This will help you identify unnecessary expenses, cut them out, and direct the money that you could have wasted on them to your debt.
- Avoid impulse buying.
- Spend less during Christmas and the holidays. A great way to get more for less for the festive season is to try and identify some cheap holiday deals.
- If you have an emergency fund, take some money from it. Always remember to repay it as soon as you can.
- Get a side gig. If your current job isn’t getting you enough to get rid of that darn debt, it only makes sense that you should look for a side hustle.
- If you’re into cooking or baking, make some delicious treats, and sell them. Don’t forget to check the regulations of the area you live in first.
4. Take a Look at Your Legal Obligations
Most states offer a cap on the amount of interest that a lender can charge. Quite a number of lenders don’t have the requisite license needed to conduct their lending practices in that state or anywhere else.
They seek terms that benefit them and hinder a borrower’s ability to pay back the loan. These terms take advantage of a borrower’s zero or little knowledge on finances, loans, and conditions.
Such lenders target people with little education, minorities, the elderly, and the financially challenged.
You don’t have to be a victim of such lenders. In the event that you default on paying the loan, the law may be on your side. If the loan is invalid and you can prove it, then guess what? You won’t have to part with a single penny.
If the lender used a loan shark to threaten you, just provide some evidence, and they could be charged under harassment protection laws.
Finding your way in the legal maze is tough work if you don’t have the expertise to go about it. Involving your lawyer is a significant step to take, especially if the lender decides to file a lawsuit against you.
Getting a lawyer pronto is what you need to do if you don’t have one already. Choosing the right lawyer is an involving process that requires your time and full involvement. Follow these tips if you’re new to it and you’ll be good to go:
- Look them up online
- Have a one-on-one interaction with them
- Find out what they specialize in
- Consult some of their previous clients if you can to know what to expect from them
- Pay attention to their track record
5. Handle Loan Consolidation Firms with Caution
Do you have a large amount of debt in your hands? Loan consolidation may be just what you need to fix your problem.
Loan consolidation is the use of one larger loan to pay off several smaller loans. The aim of this normally is to get a lower monthly payment or interest rate.
It exists in two primary forms: unsecured and secured. An unsecured loan is harder to get, but it comes with a perk; is it doesn’t need any collateral. You need a high credit score to get this kind of loan.
A secured loan, on the other hand, needs some collateral. It could be your home, car, or anything else with financial value.
Sounds like a great deal? Before giving it a shot, here are some of its drawbacks that you should put into consideration:
It May Not Bail You Out
Loan consolidation pays off a couple of credit card balances and frees up a little bit more income. This doesn’t mean that you should continue spending your money the way you were prior to the consolidation.
Failure to Differentiate Could Cost You
Failure to know the difference between the two types of loan consolidation could cost you your assets. You could also lose them if you default on paying the loan.
Higher Payback Terms Equals Strain on You
Some of the things you should consider before choosing a loan consolidation firm to work with are their payback terms, interest rates, and monthly payment.
They should be lower than your current payment. Be sure to go through the documents carefully before shaking on it.
6. Cancel the Continuous Payment Authority if it Proves to be Too Much
A payday loan is supposed to be a relief. Not a migraine-inducer. You should pay it off with the greatest of ease.
If clearing the recurring loan interest takes such a toll on you so badly that you don’t have enough moolah for essentials such as food, don’t think twice about withdrawing the continuous payment authority you had issued to your credit lender.
Do this by calling up your bank and let them know about your decision.
Does the term ‘continuous payment authority’ seem alien to you? Here’s an outline of it and a description of how it works to put you in the picture.
A continuous payment authority, or CPA for short, is a kind of recurring payment where you allow a company of your choice to withdraw money from your account regularly by use of your payment card details.
To get started, you give your credit or debit card details to the company you want to make a regular payment to. You can do this in person, through the phone or online. And, there’s usually no written account of the authority being set up.
To avoid any problems in the future, you must ask them to state (it’s better in writing) whether the payment will be taken by continuous payment authority, direct debit, or standing order.
You could cancel the CPA either by informing your bank or the company. If you choose to cancel by telling your bank, let them know at least twenty four hours before any payment is deducted from your bank your account.
Additionally, inform your lender about it through a formal letter to minimize chances of them filing a lawsuit against you.
7. Come to an Agreement with the Debt Collection Agency
Your lender may decide to refer you to a debt collection agency if you default in paying off their loans more than once.
The agency may put you through hell by bothering your colleagues, relatives or calling you repeatedly at work. Don’t ignore them or lose your cool. They’re only doing their job.
A debt collection agency, or collection agency as they’re sometimes known, is a company that follows up on debts on behalf of creditors or lenders.
They apply several techniques to get you to pay up, such as lawsuits, phone calls to you, or even writing and sending letters to you.
If they can’t reach you through these methods, they go further by hiring private investigators and use computer software to reach you. They may also report you to credit bureaus to get you to pay.
There are two main types of debt collection agencies: internal collection departments and third-party debt collectors.
They cannot reach into your bank account or take a paycheck. They rely on you to pay up.
You may hate them, but as long as you have a cloud of debt hanging over your head, they’re there to stay.
You can’t get away from them, so you might as well learn how to deal with them. Check out these tips on dealing with them:
- Record calls any time you’re on the phone with them
- Don’t hide your assets or money from them if you truly owe them
- Learn the Statute of Limitations of your state
- Don’t pay any attention to them if they threaten you
- If you’re the type to get mad fast, don’t talk to them on the phone. Ask them to contact you in writing and hang up.
8. Negotiate With Your Lender
At some point or another, we all need a financial boost from someone else. Whether it’s for personal use or business purposes, we can’t avoid borrowing money.
When payment time comes, and for one reason or another, you’re not able to pay up, try negotiating with your lender.
It pays to find out their terms and conditions to avoid getting yourself into a sticky situation sometime in the future.
With some excellent negotiation skills and a positive mentality, you can buy yourself more time and come to an agreement that’s comfortable for both you and them. Here are some pointers on how to successfully negotiate:
Look Them In the Eye
Whether the lender shows up for the negotiation in person or sends someone in their place, realize that they might try to intimidate you or make you feel nervous so you can make a wrong decision. Take a deep breath, look them in the eye, and present your case.
Have a Written Agreement In Hand
Once you’ve both arrived at an agreement, shaking hands isn’t enough. Put the agreement in writing, and make copies for yourself and them. It will come in handy later on. It also shows your level of seriousness.
Don’t Quickly Agree With the First Offer
No matter how good it might sound, don’t be in a rush to accept the first offer they give. Take things a little further just to see how far they’re willing to go or ask for more time to think about their first offer if that’s all they are ready to give.
What Are the Consequences of Not Paying Payday Loans?
They vary depending on the lender, but one thing’s for sure: you may not be taken to court for failing to pay one.
Most times, it’s the lender who ends up in trouble if they threaten you in any way. However, lenders can use any method possible to get their cash back with the agreed upon interest. Most of them resort to techniques such as:
Automatic Withdrawals from Your Bank Account
If you gave them your bank details as part of the loan agreement, they won’t hesitate to make automatic withdrawals from your account. Even if you didn’t give them the details, they’ll find a way to access them.
Constant Phone Calls and Letters from Lawyers
Changing your phone lines or moving to another part of the country may not be enough to keep them away. If they can’t reach you, they’ll contact those closest to you, mostly your spouse or partner, and ask them your whereabouts.
They’re prohibited by law to reveal your debt situation or reveal who they are to anyone.
Another more effective technique that they can use is to send you letters from lawyers. These letters could come daily or weekly.
Appearing on the Blacklist
Due to the small amount of the loan, the lender won’t report you to any of the three major credit bureaus. Instead, they’ll flag your name in the proprietary system used by many payday lenders. The result? No more payday loans for you.
They’ll Deposit the Safety Check
Before a loan is dispersed, a safety check is written by the beneficiary of the loan to the lender. It gives them the right to cash it in should you default or fail to pay the loan.
If you don’t have enough money in your account, you not only have to deal with the fees that the bounced check will accrue but with the repayment of the loan as well.
Are Payday Loans Worth It?
Experts say that they’re one of the most expensive ways of borrowing money considering that the outstanding payday loan balance may increase when penalties, fees, and interest are added.
They could also severely affect your credit score and ruin your chances of getting any more loans in the future. If it’s a one-time thing and you have a practical strategy in place to pay back the loan on time, you could request for one.
Clear the Debt and Leave it at That
A payday loan isn’t always easy to pay off. This is mostly the case if it has accumulated over the months.
If you’re struggling with a pay loan debt at the moment, don’t worry. There are lots of ways you can use to raise the money.
Whatever you do, don’t fail to pay the debt on or before the specified due date. Most lenders aren’t as heartless as they’re thought to be. They just want their cash back. Negotiate, ask for more time, do anything within your means to clear the debt.
Weigh your options and use the techniques above to regain your financial freedom. You can do it, no matter how long it takes. Just remain focused and know what you want.