According to Pew Charitable Trusts, twelve million Americans use payday loans every year.
A payday loan is a short term, high interest loan designed to bridge the gap between paychecks when you have an immediate need for cash. The Federal Reserve has reported that nearly half of Americans do not have enough savings to cover for immediate cash needs.
Many Americans are living from paycheck to paycheck. This is the reason why a lot of people avail of payday loans. Anyone with checking account and steady income can take a payday loan.
The more common borrowers are those without access to credit cards or those without savings account. People with no credit or those with credit problems also often turn to payday loans.
How does it work?
Today, it is easier to secure a payday loan. You can apply a loan directly at your lender’s office or you can just submit your application online. You provide personal and financial information, apply for a loan amount secured by a check or bank account debit authorization, pay the finance charge and receive cash.
Loan amounts generally range from $50 to $1,000, depending on your state laws and the average term is about two weeks. For instance, if you have an emergency need of $200, you’ll write a postdated personal check payable to the lender of $230 (the borrowed amount plus $30 finance fee).
The lender then advances you the $200. After the term, say fifteen days, you pay your lender. The lender deposits your personal check in the bank.
If you are not able to pay your debt at the end of the term, you will have to write another postdated check for the amount, plus additional finance charges. Thus, the total amount you owe increases due to additional finance charges.
Payday loans can become very costly. The annual percentage rate may go as high as 400%. This is very much higher compared to the APR of most credit cards, 9%-30% and personal loan with APR lower than the APR of credit cards. It can be very costly if you are stuck with such a loan for a long time. It can even lead to larger financial problems.
Payday Loan Help
What happens if you can’t pay your payday loan?
If you default on a payday loan and you are unable to arrange a payment plan with your lender, the lender may sell your account to a collection agency. The collection agency then reports your unpaid loan to the three major credit bureaus.
This will certainly have a negative effect on your credit score. You will then have difficulty getting other loans and credit cards because this will stay on your credit report for the next seven years.
In addition, collection agencies typically use aggressive collection strategies. They will bother you at your work place. They may even contact your family and friends to collect payment.
In default, you also have to prepare to be sued in civil court. In many cases, the lender wins. When your lender has a court judgment against you, he or she may seize your property and sell it to satisfy the balance of your loan.
Since your loan is not secured by a specific property, your lender can seize any property you own. In most states, judgments are good for ten years.
That is, your lender can run after any of your property within a ten-year period as long as the loan has not yet been fully paid.
Need Help Getting Out of Payday Loan Debt?
How can a lawyer help you in the settlement of your payday loan?
A lawyer can certainly help you go through the process of settling an unpaid payday loan. These are the ways by which the attorney can help:
- An attorney can give you legal guidance. The legal process of settling payday loan can be quite complex and tedious. Your attorney is aware of your state laws regarding payday loans. He will make you aware of these rules, too. The attorney can give valuable assistance as required by the circumstances of the case.
- An attorney can help put an end to those annoying calls. When your lender knows that you have an attorney, he or she will be more careful when making those calls. Further, your attorney may act as mediator between you and your lender.
- An attorney may negotiate with your lender. When you are represented by an attorney, your lender may be more willing to work with you. The attorney will help you negotiate a more favorable payment plan, even a reduced amount. This will certainly lessen the financial stress that you are confronted with.
- An attorney will help you in the event of a lawsuit. He may even try to convince your lender of an out of court settlement.
- An attorney knows the statute of limitation very well. According to the statute of limitation, you can only be sued by your lender within a certain period of time. Beyond that, he can no longer sue you in court for unpaid loans. The statute of limitation varies across states. Your attorney can explain to you in detail the statute of limitation of your state.
Payday Loan Lawyers
If you’re struggling with payday loan debt, please contact us. We have experience with this problem and can help you with a solution that will truly work.