Payday Loan Recovery – Get out of payday loans for a stress-free life
A payday loan is a short-term cash advance or a short-term loan that is normally paid off after receiving the monthly paycheck. The loan amount is due on the next payday, hence their name “payday” loans. It allows a borrower to manage his/her financial situation until the next payday. A payday loan may also be helpful in an emergency situation, especially when banks and conventional financial institutions are unable to give the loan requester a loan.
While the idea of payday loans sounds great, there are some downsides to this type of short-term debt. Payday loans come with very high interest rates and they tend to charge significant processing fees. It is also believed that quite a few borrowers are not able to pay off the outstanding payday loan amount by the next payday. Sometimes, borrowers are stuck with payday debt for a few months. Such a situation leads to borrowers having to pay an increasing part of their paycheck towards overdraft fees, late charges, and interest. The situation tends to get worse as time passes by.
However, there are ways to stop this cycle and come out of payday loan debt. For that to happen, there are certain things that you have to understand about payday loans, the laws, the lenders of payday loans, and your own situation. If you are willing to put in some time and gather information, then by following some basic guidelines, you can successfully get out of payday loan debt and live a stress-free life.
Be aware of the initial steps
As soon as a payday loan goes into default or if a payment is delinquent, the lender immediately tries to recover the money that was due. The first steps towards this recovery attempt begin with phone calls and withdrawals from your bank account. Given the unsecured nature of a payday loan, and taking into account the credit profile of payday loan borrowers, lenders expect that the borrower will default on the loan at the first sign of any delay in payment. This extreme view leads to the aggressive efforts for recovery of dues. Your payday loan lender will start initiating withdrawal from the account which you used in the application process of your loan. If a large amount cannot be withdrawn, it will result in a failed transaction and the bank may charge you fees for the failed withdrawal attempts.
The lender also tends to hire debt collectors, who will make multiple phone calls to you. They may even call your family/friends, whom you mentioned as references in your loan application. These things are being listed here not to scare you, but rather to prepare you. You must be aware of these because you need to keep calm and come up with a plan to tackle the issue of repayment. Preparing yourself mentally is the first step.
Know your information
Payday lenders will make claims on the amount you owe them. However, it is extremely important that you, the borrower, are aware of exactly how much you owe. Make a note of the loan amount that is outstanding. If you have multiple payday loans borrowed from multiple sources, then make a note of all those amounts. Make a file of all the documentation for the payday loan/loans that you have. Once you know the exact amount that you need to pay off, only then can you come up with a plan of repaying those loans.
You also need to know some basic laws of the state related to payday lending. This step is important because it allows you to find out if your lender is following all the relevant laws. You can also find out if the lender is licensed to operate in your state.
Start saving more and spending less
Once you come up with a plan on how you will repay your outstanding payday loans, the next step is to figure out how much money you need to keep aside every month for the repayment. You will have to start cutting down on certain expenses, things which you can do without for a few months. The idea is to have enough savings from your paycheck and channel it towards repayment of the outstanding loan amount. If you sit down and analyze your spending patterns, you will surely find things which you can cut down on. Go through your bank statements and observe the amounts you spent and where you spent them. Gather all payment receipts that you have. Document all this info on your computer if that makes it easier for you. Find a way to repay the loan without doing any jobs and by using your existing paycheck.
Create additional sources of income
If your savings and current paycheck are not enough to pay off the payday loan debt, then try creating additional sources of income. One way to do this is by picking up an additional job. Take up a freelancing contract. The extra cash can be added to any savings from your paycheck. Make repayment of the outstanding payday loans the focus of your efforts. A part-time job will give you a much-needed boost financially.
Settle with the lender
Every payday lender knows that hiring an external agency to collect outstanding dues is going to be a time consuming and expensive process. The lender would very much prefer to collect the dues from the borrower directly without any involvement of a third party. Do not think that the lender has an incentive to come after you or harass you. All that the lender is interested in is to recover whatever dues that can be recovered. Sometimes, payday lenders are known to have settled for a few cents on the dollar. As a first priority, the lender normally tries to recover the dues directly without any third party’s help. If that does not work out, then the lender may hire a collection agency. However, there is a chance that the lender will try to settle the payday debt with you. So, if you find yourself in a difficult situation of being absolutely unable to pay off the outstanding payday debt, it is best that you negotiate some sort of settlement with the lender.
There are quite a number of NGOs throughout the country that help people with debt trouble. Research such organizations in your city or town. Visit them and ask them for guidance. There are also legal experts who work pro-bono. Find out such lawyers, or find out legal NGOs who can advise you for a low fee (or for free). It is always better to get advice from a qualified expert and then act accordingly. No amount of internet research can substitute for professional advice.
Face the court with confidence
If your lender drags you to court, do not panic. If you do not show up in court, it will not look good on you. The judge will pass a judgment against you and allow the lender or the collection agency to collect money from you. Go to the court and ask the lender for proof when in front of the judge. It is believed that a majority of debt recovery cases are dismissed due to lack of proof. Your lender may not have sufficient proof that you owe them money or the lender may not have the information organized in a presentable way. Whatever the case, it is worth giving it a shot. Use the legal advice of an NGO or a pro-bono law consultant and try to find ways in which you can protect yourself. Be confident and always remember that you cannot wish your debt away. You have to repay it or declare bankruptcy. But you cannot just close your eyes and hope that the debt disappears.
Consolidate your debt
If you have multiple payday loans and are having a tough time paying them off, consolidate all the loans into one. You can do that with a debt consolidator. Team up with a reputable company, who will consolidate all your loans and have you pay one monthly payment. You may end up paying higher interest rates for the convenience of one simple payment, but that interest rate payment could be relatively lower than paying high loan fees on your individual payday loans. The debt consolidator will also negotiate with all the different payday lenders on your behalf. Life will be a lot less stressful for you.
When you look at various debt settlement companies, look at the track record of the company. Try to establish their credibility and how people view the quality of their services. Check for any relevant certifications, memberships to industry bodies, and other affiliations that the settlement company has with such institutions. Ask the company if they will give you a guarantee that they will settle your debt or refund you the fees which you paid them. Research all the options and selection process online and trust your judgment.
Based on the financial situation which you are in, you can try different approaches to get out of payday loan debt. Every process requires time and effort from your end. It will not be an easy experience, you will have to make some sacrifices. But at the end of it all, you will come out with a clean slate and ready to live your life stress-free again.