Getting Out of Payday Loan Quicksand

payday loansThe only debt worse than credit cards is payday loans. While credit card debt will double in about 4 years, debt created by payday loans will often quadruple in just one year, making these the deadliest of all debts. One tiny slip-up can mean lifelong debt, so it is very important to fix the problem, and fix it quickly.

Only a handful of states limit how many times your payday loans can rollover and keep accruing interest at insane rates, and even fewer make it mandatory for lenders to accept payment plans – making your options for absolving the debt few and far between. However, there are ways to get relief from payday loans even without the help of those special laws.

Working With the Lender

In some states payday lenders must accept payments. If your account has reached the maximum number of rollovers legally permitted and you state that you cannot pay the balance, eight states require payday lenders to set up an installment plan. You can look online to find out if you live in one of these states. If not, your first line of offense from the payday lender will be a collection agency. Maybe these agencies are just a specially developed breed, but for some reason collection agencies working with payday lenders can come up with some pretty scary threats. Don't let their empty words frighten you too much though – technically, all they can do is sue you for the debt, and they have to serve you with legal documents telling you they are, in fact, suing you.

Dealing With the Collection Agency

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If you're just tired of getting the phone calls, you can send a cease and desist notice asking the agency to stop all communication with you. The Fair Debt Collections Practices Act (FDCPA) makes it legally impossible for collection agencies to get in touch with you after you have asked them to stop in writing. However, before you try to settle the debt with the collection agency, you should make sure the agency is actually legally empowered to collect your debt with a letter requesting verification and proof of the debt. Once you know these are the guys you have to pay, then it's time to move forward with absolving the debt.

Options for Paying Down Your Debt

The best options for paying off those payday loans are debt consolidation and debt settlement. You can either settle the debt on your own or negotiate with the collection agency, but you should only take this road alone if you know how collection agencies work. You should be able to get your debt reduced by at least half, if not more, especially if you go through a debt settlement firm. If the amount is still too much for you to handle (or you are still accruing a lot of interest and it hasn't been handed over to a collection agency yet), a debt consolidation loan will get that debt paid off with a much lower interest rate.

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Following are fees that payday loan companies may charge:

  • Interest
  • Administration fee/Processing fee/Convenience charges/Verification fee
  • Broker's fee
  • Collection fees
  • Early repayment fee
  • Initial or one-time set-up fee
  • Loan repayment fee/First-party cheque-cashing fee
  • Locate fee
  • Return fee/Non-sufficient funds (NSF) fee
  • Roll-over fee/Renewal fee/Finance charge/Additional charge/Extension fee
  • Wage assignments or liens on personal property

More Information is available here.