7 Tips for Dealing with Payday Loan Debt

Payday loan debt can throw you into dire straits if you are not careful. However, if you have a bad credit score or if you face an urgent need for money, you may have no other option but to go for a payday loan because the banks or lenders often don’t carry out a stringent evaluation or examination of your credit history and the loan is sanctioned quickly.

If you can exercise prudence, paying off the loan should not be difficult.

However, if you use a payday loan to meet your living expenses and you continue to rollover the loan again and again, you would end up with a vast debt that would make your life miserable.

It is much better to take personal loans like installment loans or term loans instead because the rate of interest is much softer, the time of repayment is usually longer and it gives you a chance to improve your credit history.

Tips to help you deal with payday loan debt

1. Stop the cycle of borrowing.

If you feel that your debt has bloated up beyond control, first thing that you should do is immediately stop borrowing any more money. Report your problem to your lender and try to take them on board by keeping them updated.

Ask for their advice but don’t let them intimidate you. See if you can get them to waive your interest and try to reach an amicable settlement. But, don’t take more payday loans to pay off a payday loan or other loans.

2. Inform your bank.

A payday loan is supposed to be a non-priority loan as it is meant to help you meet a short-term, one-off payment requirement.

Hence, if you feel that paying the recurring loan interest has depleted your base so badly that you don’t have enough money to pay for your utility bills like electricity, mortgage, rent, food or medicines, call up your bank to inform them that you want to withdraw the continuous payment authority that you had issued to your credit lender.

Follow it up with a formal letter, drafted with the help of your lawyer if needed because it will be vital if your lender files a lawsuit against you. Also, immediately inform the lender about the same.

3. Talk to an independent debt adviser.

A number of law firms or financial firms offer free advice to those dealing with payday loan debt. You could consult one for free and get valuable guidance.

4. Check your legal obligations.

In many provinces, there is a cap on the interest that a payday lender can charge.

However, many lenders either don’t have the requisite license to conduct lending business in the province or openly flout the laws like the cap on interest rate.

Generally, provincial laws are in favor of the defendant in loan default cases and if you can prove that the loan was invalid, you may not have any obligation towards settling the loan.

Also, if you can prove that the lender used loan sharks to intimidate you, they could be charged under harassment protection laws. Consult a lawyer to know about the laws and your legal options in case your lender files a lawsuit.

5. Don’t agree to loan rollover.

Always try to pay off a payday loan, even if it means going without a few dresses or fancy dining.

If you dither or yield to the lure of allowing your lender to roll over the loan to the next month or next payday, you may get trapped. It would be very difficult to free yourself from the quagmire.

6. Strike a deal with the deal collection agency.

If you default a few times, your lender may refer you to a debt collection agency. They would follow you up again and again by calling you non-stop at work or even bothering your colleagues or relatives. Don’t avoid them.

Sit down and decide the repayment schedule that you want to follow. Give them a legal notice as to which number or email address they can contact you at and the time they should call. Constantly exchange letters and keep them in the loop.

7. Be cautious while dealing with loan consolidation firms.

Loan consolidation is a good option to consolidate all your debts into one account.

But, be careful. It could distort your credit history if your numbers are reported and sometimes, the renegotiations may put you at a disadvantage vis-à-vis the lender(s). Read the documents carefully and get all the details of payment before striking an agreement.

In Conclusion

Dealing with payday loan debt requires a proactive approach and careful consideration of your options. While payday loans might seem like a quick fix, they can quickly spiral out of control if not managed properly.

Stopping the cycle of borrowing is crucial, as is informing your bank to halt continuous payments. Seeking advice from independent debt advisers and understanding your legal obligations can also be immensely helpful in navigating the situation.

Avoiding loan rollovers and negotiating repayment terms with collection agencies are important steps towards regaining financial stability. However, be cautious when considering loan consolidation firms, as their services may have implications on your credit history and financial standing.

By following these tips and taking proactive measures, you can work towards resolving payday loan debt and moving towards a healthier financial future.