Payday loans can lead you to endless escalating monthly payments.
Payday Loan Trap
Consumer Finance Protection Bureau has recently removed measures designed to curb payday lending to borrowers not able to repay.
There are two methods to extend payday loan. Both options lead to higher cumulative expenses. Two weeks after the original loan amount was due, it is due back. Check out latest information at https://www.paydaynow.net/.
A second option that can be more costly is where the borrower fails to make the required payments (other than fees) by the due date. Instead, he or she takes out another loan in order to repay the original loan amount and interest. The additional interest charges are added to the new, higher rate.
According to the CFPB, 80% borrowers of payday loans extend loans at most once. Around 12% of the 80% end up renewing loans ten times or more. Unless there are stricter laws, payday lenders who belong to the Consumer Financial Services Association of America (CFSA), are restricted from allowing more than four renewals of a loan.
A major reason for the high cost of payday loans is the common requirement that lenders have access borrowers’ checking accounts. Lenders may request multiple withdrawals, even if the account has sufficient funds to repay it. This is a major reason for the high cost of payday loans.
What happens if I default on my Payday Loan?
Worse, if you fail to pay your payday loans on time, lenders may transfer the debt quickly to collections. This could lead to a negative credit score and make borrowing money harder in the future.
If you have taken out payday advances and are now in a cycle with increasing debt, your situation may seem hopeless. You do have options.
Optional Ways to Pay Off Debt
Extended payment plan. EPPs are required in many states. This allows you a shorter repayment time and typically four weekly payments. The CFSA trade group guarantees that payday lenders will provide EPPs for all borrowers who are having trouble paying their loans. However, payday lenders can refuse to offer EPPs.
Debt consolidation loans. You might be interested in a payday advance personal debt consolidation loan. It’s possible to borrow money with very low interest rates, and then repay your payday loans fully. You must repay the personal loan. However, it is possible for you to establish predictable monthly payments that do not increase in price and are within your financial means. Although personal loans must be approved, they are available to anyone with good credit.
Alternative loans for payday (PALs)These loans were developed by credit unions in order to support the financial needs of those who need payday loans. They have lower costs and longer repayment terms. While they are not designed to be used as a replacement for payday loans, one can be used for the repayment of a payday loan. They can be paid back in equal monthly amounts for up six months at a maximum rate of 28%. To be eligible you must have been a member for at minimum 30 calendar days.
Peer-to-peer loans. Compete against traditional financial institutions with web-based loans websites. Although they don’t always verify credit scores, many lenders require proof of income. Lenders that have poor credit ratings or no credit are eligible for loans. Credit scores Fair for those with low credit scores . Even if you borrow less than $5,000, these websites are worth checking out. It is very easy to apply at multiple sites in one session. Once you have been approved, you will quickly be notified. If approved, you can get the loan amount to check account in a matter of days.
Debt management plan. If all other options have failed and you are unable, or unwilling, pay off a payday advances, you might think about getting a loan debt management plan (DMP). With a certified counselor, you can create a budget and debt repayment schedule. Or, negotiate with creditors or payday lenders to pay less. Participation to the DMP will result in all credit card accounts being closed. It will also appear on credit reports. Lenders view it as a denial of credit. This can make borrowing money difficult over time.
What can you do to get rid of your payday loan debt?
Once you have managed to get out of the debt trap of payday loans it is important to make sure you continue to save your money.
Building credit can take many months or even years. Therefore, if you are in urgent need of short-term credit, consider obtaining PALs from a credit union.