Having the hard time paying or unable to pay your payday installment loan? Is there a legal way to stop paying for a loan?
There are times when a borrower is unable to pay for his payday installment loan anymore. When this time comes, hiding from lenders or intentional not making payments is not a good solution. But there is a legal way to stop paying for a payday installment loan. In fact, most lenders will agree to a settlement or an extended payment plan.
Basically, payday installment loans are offered to individuals desperately in need of cash and have little or no access to traditional lines of credit. A payday installment loan lender requires a borrower to write a check for a certain amount plus a fee and then post-date it for the next payday. The payday lender then agrees to hold the check until the due date. If the borrower is unable to pay the loan in full by the due date, the lender can charge additional fees making it difficult for the borrower to pay off the debt.
In a study by the National Consumer Law Center, the interest rates for payday installment loans can be vary between 300 to 2000 percent of the principal amount. Also, there are payday lenders that use account and routing numbers which are found on checks to collect payments by withdrawing the borrowers’ funds at any time. The borrower, when taking out the loan, signs an authorization for direct deposit, giving the lender free access to the banking account.
Because of these, many borrowers opt to default on their loans. But, unknown to many consumers, there are many ways in which a consumer can reconcile outstanding debt with his payday lender and legally stop paying his payday installment loan.
1. A borrower may contact his payday installment loan lender and ask him to hold the check for a few additional days.
If a borrower needs a longer time to pay the payday installment loan, he may consider requesting a rollover. This may not be advisable because it will incur additional fees. However, if no other option is left, this is one of the safest ways to save a borrower from insufficient funds fees from the bank.
2. A borrower has the option to request an extended payment plan if unable to pay on the due date.
Be sure that your lender is a member of the Community Financial Services Association (CFSA). Members of CFSA follow guidelines that adhere to upholding the consumers’ welfare. If the lender is not a member, the borrower is advised to search for the state requirements for payday installment loan extensions. If an extended payment plan is granted, be sure you make good on payments.
3. You may write a letter if you intend to stop paying for a payday installment loan.
Inform your lender in writing that you won’t be able to pay the full amount of the loan including fees and interest. You may offer to pay the remainder of the principal and see if the lender agrees. If the original principal amount has already been paid, less fees and interest, then ask for the account to be considered paid in full. If the lender agrees with any option you offer, keep a written record of your revised agreement for future reference.
4. Most of all, it is important for a borrower who intends to stop paying legally to make sure if the payday lender he is dealing with operates legally in his state.
If the lender is illegal, the borrower is only obligated to repay the principal amount, excluding the fees and interest. The borrower can also do research on consumer laws and bills, such as SB 834, drafted by the National Consumer Law Center and the Consumer Federation of America for consumers’ protection, which protects a borrower who is unable to pay his loan.