Payday installment loans are great sources of instant cash. These are to be used every once in a while, when an immediate cash need arises. However, most of the time people find themselves “trapped” in debt. If they are not able to repay their loan when it’s due, the tendency is to take out another loan in order to get by. In the long run, consumers fall into a cycle of debt.
Oftentimes, consumers don’t know how to get out of a payday installment loan and feel confused and embarrassed by the situation. However, there are options available for consumers. They can opt for a debt settlement.
In a debt settlement program, consumers are given an affordable monthly payment which is provided by a debt settlement company. The company will negotiate on your behalf with lenders. They can freeze collection harassment from these lenders and help consumers pay off their loans.
A debt settlement company sets up a new payment plan that will help consumers get out of debt within 6-12 months. However, the length of time it takes to pay off the loans and the amount of the monthly payment will depend on the amount of the payday installment loan debt incurred and the consumers monthly net income.
If you are considering debt settlement with your lenders, it is very important for you to know some of the basic things about payday installment loan debt settlement law.
1. Lenders cannot force consumers to sell their assets (car, shares of stocks, properties) as payment for the unpaid loan.
2. Lenders cannot garnish the wages of consumers to settle their payday installment loan debts, except under court orders. In fact, the Fair Debt Collection Practices Act prohibits payday installment loan companies from garnishing wages of consumers to pay off debts. Be aware that wage garnishment and liquidation of assets to settle debts is possible only if there is a court order ordering said action. If the court finds that the amount of debt can not be paid with the consumer’s monthly income, it may issue an order to sell assets or garnish the debt from the consumers salary.
3. Lenders cannot file criminal lawsuits against consumers. The law states that non-payment of payday installment loan debts is a civil matter and is not considered as a criminal offense. Lenders cannot threaten that you will be put in jail if you cannot settle the debt.
4. Unreasonable collection and physical or emotional harassment by lenders is prohibited by the Fair Debt Collection Practices Act. In fact, consumers can request lenders to stop calling them through writing because they are legally obligated to honor such requests.
5. Debt settlement services cannot charge customers in advance. The payday installment loan debt settlement law states that debt settlement companies cannot charge an upfront fee on their services unless the consumer has settled his debts with his lender.
6. Debt settlement companies should disclose the fees of their services through a written contract. Consumers are advised to read the fine print of the contract and understand clearly the written provisions. In addition, consumers must check the ‘disclosure box’ in the contract that provides the cost of the services.
7. Although lenders cannot file a criminal case against consumers, they can file a civil lawsuit. When they file such a lawsuit, the court sends the consumer a notice. The defendant must respond and attend court hearings or else the court can file contempt charges resulting in jail time.
8. If lenders are proved to be running their business illegally, consumers are obligated to pay the principal amount of the loan only. Aside from that, consumers can file complaints with the Federal Trade Commission and state authorities.