So What Happens When I Can't Pay Back My Loan On Time?
Do you know the most common problem people have when taking out a payday loan? Even for the most experienced consumers, it's getting the balance plus applicable fees paid back on time. Many people don't exactly understand what they're doing when they take out a loan. In essence, they are borrowing from themselves. When you request funds, you'll have a short period of time to pay back the lender, two weeks or less usually. For most people, that money will come from their next paycheck, but what happens when they need the majority of the funds from that paycheck? That's when they have trouble repaying what they owe in time. It's a common, but difficult situation as you'll either have to take out another lending agreement to cover it or face a multitude of late fees and non-sufficient funds fees. Your lender will almost certainly charge you late fees and your bank may as well if you send the provider a postdated check that bounced. However, if you act early enough, you may be able to save yourself from taking out another loan and avoid the fees.
While not being able to reimburse your provider can be stressful and can hurt you financially, you may be able to work out a mutual plan. As soon as you know you definitely cannot repay the amount owed by the due date, you should contact the lender immediately. Talk to a customer service representative or manager in charge of collecting the funds and tell them about your situation. If you can manage to get the cash within a few days, just ask them for a short extension on the due date. But if it will take you several weeks or longer to get the balance paid off, you should probably ask if you can work out some type of payment plan where you can pay it off in installments. Often times, the lender will be willing to work out a plan in order to get their funds back and create a good relationship with the consumer that might bring them back next time they need financial assistance. Keep in mind that the entity may ask that you pay more interest or some type of fee for accommodating you. Either way, it will surely be less than the late fees you could face from the provider and your bank for not repaying the amount due. So the general rule of thumb: if you've got a balance due and can't pay it off on time, at least contact the provider to see if you can work something out. It shows you're trying to pay off what you owe and you might be able to avoid some costly fees.
If I Can't Repay My Loan, What Will My Lender Do?
Many people seem to be unaware of what kind of action a provider can take if they don't receive their funds back. Here's how the process works for most organizations: After a company lends out their cash to a customer, they typically cash the customer's postdated check on the due date. If the check bounces, the provider will charge the consumer a bounced check fee and try to contact them. When they get a hold of the individual, they'll ask that they repay the remaining amount or opt for an additional installment to cover the cost of the last one. Now if the consumer bounces another check or still cannot come up with what was borrowed, the company will again have them take out another loan or could possibly set up some type of plan. It varies between companies; some may look to make more money off the interest rates on the debt, while others may simply want to just recoup what they lent. At this point, if the customer still does not initiate repayment, the company will start making phone calls to the individual, their references, and possibly their job.
The lender could also hand the consumer off to a collections agency, who will then start their process of getting the money reimbursed. Beyond this, there is not a whole lot more the provider can do to get their funds back. Some companies may attempt to sue a consumer for purposely writing bad checks or check fraud, but most people can prove that they did originally intend to pay back the balance. However, just because the provider has not legally forced you to initiate repayment, that doesn't mean you shouldn't do it.
Repercussions to Consider
If you have an outstanding balance and haven't bothered paying it off because you the company hasn't actually forced you to, know that there are consequences for the debt. The major problem you'll encounter if you don't pay off your amount owed is that it will eventually get sent to a collections agency. These agencies will call your home, your work, your references, and even visit you in person if necessary. They will continue to contact you until you by mail, phone, or in person until you've completed the repayment process. While this may only seem like an annoyance, it will also have a severely negative affect on your credit score. Having a debt sent to collections will always drop your score, which could then stop you from getting approved for new credit cards, car financing, and anything else that requires a decent credit score. If you owe money to a provider, it is definitely in your best interest to get the balance paid off or at least contact the company to work out a plan, even if you find they cannot take any legal action against you for it.
Can I be Sued if I Don't Repay the Balance?
You wouldn't borrow from your friend, then leave the country and never pay them back would you? The same idea applies to borrowing, but not everyone follow this edict. There have been customers that receive advanced funds and leave the country under the assumption that he or she will never have to reimburse the company. While some entities may choose not to pursue such consumers, others will hire collections agencies that will do everything in their power to get a hold of them. Depending on how large of a debt you have, the company could decide to file a law suit against you. If the company is able to get a judgment against, you could be forced to pay back the money through bank account levies, wage garnishment, or property liens. Keep in mind that each state has different laws regarding this and several has laws that even force companies to set up installment plans with their clients. So while it's true that a lending company can file a judgment against you, it really should never come to that point.
If you think you're in danger of getting a judgment filed against you, you should do everything you can to avoid it. The easiest way to do this is to simply get in contact with your provider before you ever even default on what you owe. By talking to your company first, you can more than likely work out some sort of arrangement with them before they even send the debt to a collections agency. At some point, your lender will give up trying to make money off you and will just want their funds repaid. Most people are able to work out a plan where they pay the balance in installments, but even if the provider is unwilling to negotiate a plan, they will at least know that you're making every effort to pay what you owe and will be less likely to file a judgment against you.
Lenders Operate Under the Local Laws
The legal action will generally depend on how they states deal and cooperate. You can expect that a collection agency will come after you when they find out you have moved to a new state. They will track you down with the intention of getting their money repaid. When they have found you, then expect them to send you a letter or call you over the phone where they will ask for their money. If you do not cooperate, then you should expect them to turn up the heat. The ability for them to legally force you to pay once again depends on how the states cooperate. But know that you are not off the hook for the debt regardless of what state you are in.
Is There Any Room for Negotiation?
The main factor will be whether or not the company even allows payment plans. It does not hurt to approach them about the subject. It may all depend on how much you owe, how late your payment is, and how you have done with previous payments. It may turn out that a plan is the best thing for both parties involved. Sometimes they may make you apply for another advance. But there are some times when your provider will not negotiate. Just because your payday company can negotiate does not mean that they will. If they refuse to help you need to find a viable way to repay what is owed without requesting more advanced funding. You may need to sacrifice some of your spending. This means budgeting your money. Become more frugal with the money you earn. Do not go crazy on your credit, but maybe you can use it to your advantage. Look into a credit card that can help you transfer balance, which will save you money on interest.