Although you have been laid off, it is still necessary to rent. You are having trouble paying your car loan and need some help. Your electricity was cut off. You need to pay your outstanding bill in order to get it back on.
Sometimes, you might need a little extra cash just to get by. So, you apply for a payday advance and pay your bills. But what if you cannot repay your payday loan on time? Here are the steps to take if you’re caught in this borrowing rut.
What is a payday loan?
A payday loan is an unsecure loan that can be taken out for a very small amount (typically $500). You may visit online for payday loans and apply at ACFA… or in person depending upon your state laws.
By writing a check postdated for the full balance and any interest, you can take out a cash advance. You may also authorize the lender for automatic debit from your bank account to cover the full balance on the due dates.
Payday lenders could charge substantial fees for money you borrow. It can be difficult keeping up with your bills, and the interest on your loan. Sullivan stated, “A $200 loan for 14 day might require a payment in the amount of $235 [or] interest.” “Borrowers are more focused on the payment amount than the total cost.
What happens to a Payday Loan if You Can’t Repay It?
According to the Pew Charitable Trusts. Americans use $30 billion per year to borrow from payday lenders. It doesn’t matter if you take out a loan for payday and have trouble repaying it. Payday loan recipients are often from underserved communities that might not have access to traditional financial institutions such banks or credit cards.
Sullivan stated that people with bad credit are most likely to take out payday loans because they cannot get the cash they need immediately. “These borrowers are often without other borrowing options.”
Lenders don’t usually check your credit or consider your financial situation when you take out a payday loans. This loan might be a good option if you don’t have a great credit rating. However, it will only cause you to be in deeper financial trouble.
Sullivan stated, “Payday loans are a trap. And there’s not much a borrower can to do once trapped.” “At some point these loans often become too much and the borrower defaults.”
If you fail to repay your loans on time, this is known as defaulting. This can lead to a drop in credit scores, garnishment of wages, and higher interest rates on future loans. You could have your loan turned over to a debt collector who will try to get you to repay the entire amount. Try to avoid defaulting on payday loans.
What can you do if you are unable to repay your payday loan?
Here are some ways to help you get out of the cycle of payday loans.
1. Check your debt
Take a look at all of your debts, from the payday loan to past due bills. Concentrate on those with the highest interest rates. High interest rates mean that the more time it takes to pay off debts, the more you will end up spending.
2. Increase your repayments
Ask your lender for an extended repayment plan. To request an extension, you will need to do so before your loan ends.
An amendment to your loan contract will also be signed. Make sure to carefully read it. It is possible to borrow a few more weeks to pay off your loan.
3. Get a personal loan
You shouldn’t be afraid about big banks, especially when it comes to personal loan applications. Although they may seem similar, personal loans and payday loans are different. Be aware of the difference between payday loans and personal loans.
Personal loans are a way to reduce your debt. These loans offer lower interest rates than payday loans, and more flexible repayment terms. It’s possible to get personal loans for people with bad credit.
4. You should try ACFA – Cashflow
ACFA cashflows and payday loans lenders have a lot of similarities. You will almost always find one that offers small installments loans to make it easier for you to make important payments. Many ACFA members have access to payday loans through their Cashflows.
ACFA cashflow members must have been a member at least for a month. You can get between $200 and $1,000 with terms up to six-months. The interest rates are lower than those on payday loans, with a maximum of 28%.
5. Get help
It is always a good idea for someone in trouble to ask for help. Asking for help can be a huge step in moving forward.
You can seek help from the National Federation for Credit Counseling. Book an appointment with someone who will directly assess your financial position.
You may need a cosigner to help you obtain a personal loan. Cosigners can be beneficial, but the loan will affect both of your credit scores. It is important to both be careful when you are taking out a loan.
Friends and family may be able to help you in an emergency. It’s far easier to pay relatives than to get a payday advance lender.
Take back your freedom
While you may be interested in a payday advance, you do not need it. You have many other options if you are unable or unwilling to repay your payday loan. Know your rights if you’ve already borrowed one. To avoid being in debt, you should explore ways to pay it off as soon as possible.