Payday loans help in different situations when there is not enough money to pay for things that are needed urgently. They have become very popular in the USA, where 12 million people are already gaining such loans for $ 9 billion a year. However, as you know, payday loans have high interest rates and not everyone can repay them on time. What then happens in such cases? What consequences will if you don’t pay back a payday loan?
We have prepared for you the necessary information to help sort this out and not get into a difficult situation. Here is what you need to know about it, read on.
What are payday loans?
Although many have heard about them, not everyone knows what it is and how it works. In most cases, they are now online and you can simply go to the website to apply for such a loan. Some companies need to get round to not get into an endless cycle of debt, especially if you do not go into all the details. That is why many people think about what will happen, if you don’t pay back a payday loan.
In any case, this type of loans should be used only when there are no other options left to solve some urgent financial problem.Payday loans are approved in most cases, often lenders do not check your credit rating, they are quickly approved and issued, but they have high interest rates, so you should use them in extreme cases.
Unfortunately, now many Americans have no savings and are not able to cope with the problem that requires $ 1,000 to solve it. A significant portion of these people cannot quickly solve even the $ 400 problem on their own, so payday loans have become so popular in recent years.
How to get a payday loan
To get quick money as a payday loan you don’t need much. You will only need to provide some kind of ID, your bank account and proof of your income. In most cases, you do not need anything else for this.
As you can see, it is not difficult to get a payday loan, but you should carefully study the conditions and the lender to whom you are going to apply. If your intuition tells you that something is wrong, then look better than another lender. You have hundreds of options.
What happens after applying for a payday loan?
After submitting the application with the provision of all necessary documents, you will need to submit bank documents on the movement of funds in your bank account, as well as payment receipts from your work. You will also have to provide some details of your bank account, which will then allow the lender to debit funds from it.
So that your account is not debited more money than originally agreed, you should pay the payday loans in a timely manner, especially since they are most often paid in one payment from your next paycheck. In general, when you take out a loan before your paycheck, you usually once the amount of the loan with interest is debited from your account and that’s it. The main thing is that you choose a normal lender and not make a mistake in your calculations.
Be careful and try to go into all the details of the contract with the lender, so that later there will be no unpleasant surprises for you. Read carefully all clauses, fine print and footnotes. Feel free to ask questions! Do not sign the contract until you are sure that you understand all the conditions described there.
What first thing to look for when finding for a payday loan lender
The main thing that makes payday loans so expensive is the interest rates, therefore, the lower the interest rate, the less you will have to pay and overpay for debt. If you don’t pay back a payday loan, then you can get into a debt trap, from which it will not be easy to get out. In such a situation, making payments you will at best repay only interest, and your debt will remain in place. Look for the lowest interest rate possible by choosing a payday loan.
Can you take another payday loan if already you have one?
Having received a quick and easy payday loan with no credit check, when you have difficulties, you might think that you can take another one to cover the previous payday loan. However, we do not recommend doing so, because this is the way to failure. Thus, you will not ease your situation, but only complicate it. You will only sink deeper and deeper into this debt swamp, due to rising interest rates and additional penalties.
In such a situation, it is better to look for an opportunity to take a personal loan to consolidate your debts. There are many lenders working with bad credit who are willing to consider lending you for this. A personal loan may have a longer term and you will be able to gradually pay off all your debt, instead of your interest rates continuing to grow.
The pros and cons of payday loans
A payday loan can be a good solution for urgent problems in the short term. In some cases, when you need urgent medical care or repair of the car in which you work or in other similar situations, a payday loan may be the most appropriate solution.
If you manage to find a payday loan lender who can offer you reasonable interest rates, then this option of financing urgent problems will be suitable. Payday loans every year helps millions of Americans in such cases.
At the same time, you should remember that this type of loans has high interest rates and is one of the most expensive loans. In addition, there are predatory lenders who just want to cash in on your difficulties, taxing you with various commissions and fees, when you become dependent on them and become their debtor for a very long time. To avoid this, try to pay off the payday loan as soon as possible.
What happen if you don’t pay back a payday loan?
If a payday loan lender cannot promptly cash your check that you have signed when you receive a payday loan, then your bank account may be charged a huge overdraft fee, which will lead to a significant increase in your debt.
Then begin the regular phone calls from the company that issued you a payday loan. They will attack you from all sides in order to exert psychological pressure on you. They will try to turn your life into hell until you repay the loan in full. If you don’t pay back a payday loan, the lender can call and write to you using all available communication channels. Some even go to threats and other unpleasant and offensive things.
Try to resolve the situation by negotiating with the lender, if possible. State calmly the essence of your situation and try to agree on a debt transfer for a period of time under certain conditions. That is why you should carefully choose a credit company for a payday loan.
If you don’t pay back a payday loan try to negotiate, it is possible that the lender will meet you instead of filing a claim or selling your business to debt collectors.
How to avoid default
Default is one of the most unpleasant consequences if you don’t pay back a payday loan. Most often in such cases, your debt is transferred to debt collectors who will disturb you with calls, letters, SMS, lawsuits, and even possibly through your employer.
In the event of a default, your credit will greatly deteriorate, and the credit score will decrease significantly. Because of this, it will be very difficult for you in the future to find financial support from any lenders. Make every possible effort to prevent default. If you don’t pay back a payday loan, then a default can be a very likely outcome of the whole situation for you.
Personal loan for debt consolidation
If your situation with non-payment of a payday loan begins to go far enough, then consider getting a personal loan to consolidate your debts. You can apply for a personal loan in installments to one of the lenders who work with bad credit, as in that case, even if you had good credit, by that time he would have time to deteriorate.
You will most likely need an installment loan to deal with the problem, if you don’t pay back a payday loan. The lender’s specialists, having examined in detail your situation and credit reports on your credit history, as well as your income and expenses, will be able to choose the best option in order to consolidate your debts.
In order to pay your debts faster, track your expenses in order to find an possibility to reduce some of them. Most often this is the most affordable way to speed up the pay back a payday loan. This is not always so easy, however, if you make a budget for a month, then you can see where you spend your money and what expenses you can reduce or completely eliminate from your monthly expenses. Once you make your monthly budget, then you will only stick to it.
To avoid getting into an unfavorable credit situation when you don’t pay back a payday loan CFPB (Bureau of Consumer Protection) recommends looking for alternatives to such loans. It is possible to contact the local credit union or other similar organizations that offer affordable interest rates and more lenient conditions. If you still have an opportunity, nothing has happened that would require urgent financial assistance, then start to draw up your budget and stick to it in order to create savings.
Due to the fact that there was such a situation with non-payment of payday loan and people getting into an endless debt cycle due to huge interest rates, in some states they began to limit the maximum possible interest rate for payday loan at the legislative level.
This is expected to help consumers save tens of millions of dollars a year. Perhaps in the near future the situation with the payday loan will change and some alternative will appear, but at the moment our specialists recommend trying to use the opportunity to consolidate your debts with personal loans in installments.
Use the advice of experts
Now you know what consequences await you, if you don’t pay back a payday loan, and what actions you could take to avoid falling into an endless cycle of debts associated with it. You can take some steps to reduce the likelihood of adverse events.
You can contact our experts to understand your specific situation in more detail and find the best solution for you, just email us.
Read our financial blog to understand how to manage your personal finances.