What you should know about payday loans
What Happens if I Can't Repay My Payday Loan?
Repaying your payday loan on time can be harder than you expected. Suddenly losing your job, not getting the promised bonus, or a reduction in hours can lead to a loss of income that makes it impossible to repay the payday loan as promised. Payday loan companies are often unwilling to work with customers to help reach a mutual agreement.
Since you gave the lender access to your checking account when you accepted the loan it is important to try and avoid nonpayment as soon as possible. There are a few ways that you can make the best of a bad situation. Repaying only the interest is sometimes an option depending on the lender. It is also possible to get an extension in certain situations. If none of these solutions work you are facing negative credit history, and debt collection attempts which can boarder on harassment.
Try to Solve the Problem Before It is Due
There are a few options that are sometimes available to avoid complete nonpayment. Securing one of these options can help prevent further action on the part of the lender.
Pay Only the Interest
Paying on the interest on the loan can help reduce the payment if you cannot pay it in full as agreed. Many payday lenders will allow a consumer to pay the interest on the due date, and the extend the principal of the loan. Keep in mind that you will again be charged interest on the principal, so only do this if you have no other option for repaying the loan.
Extensions
A select few payday loan companies will offer an extension on the loan. This is rare, but it is worth checking on. If you can get an extension, it will often be for only one payday so you will still need to find a way to pay the payday loan off as quickly as possible.
Non Payment Affects You For a Long Time
If you cannot reach an agreement with the lending company than you are facing a long term battle as a result of your failed payday loan.
Negative Credit History
Payday loan companies will almost always report negative payment history to credit bureaus. This means that not only will you fail to qualify for additional payday loans your financial life can be put at risk including the ability to secure housing, gain employment, or obtain credit cards.
Debt Collection
Payday lenders work hard to get their money even after the loan is in default. You provided a large amount of personal information when you applied for the loan and all this information can be used in an attempt to collect the defaulted payments. Collection attempts can include calls to your home, place of employment and references. Payday lenders often will come by your home if they are a local company or repeatedly call you. If everything else fails to secure payment, the lender can also have a court judgement placed against you requiring you to repay the loan.