A payday loan is probably the easiest loan to avail of. This is why it is a popular choice among people who are facing a financial crunch.
This loan is usually availed when someone is running short of money. Some even avail of it just before their payday hence the name payday loan.
When someone is facing a financial crunch, they could miss out on their payday loan repayments and this could make them worried about legal action being taken against them.
If you have missed a payday loan repayment and are worried about criminal charges being filed against you, then here are a few doubts cleared for you.
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What Happens When You Cannot Repay Your Payday Loan?
When you avail of a payday loan, the lender usually takes a check from you as a security deposit. They use this check to claim the amount that you owe them. If you have insufficient funds in your account, the check will bounce.
Here is what happens after that:
- Certain lenders will try to get in touch with you
- A few lenders levy a small amount as a penalty
- Some will start their debt collection process
- Other lenders will try depositing the check multiple times
- Some lenders will charge excessive daily interest on the amount owed
There are a few payday lenders that may also threaten to sue you however here are a few things you should know.
1 Most of the payday loans come from tribal lenders, and these loans are considered void in the court of Washington. They cannot force you to pay the interest amount since they do not have a license.
2 If they threaten, you can always get in touch with the Washington State Department of Financial Institution. If your lender is a tribal member then the Financial Institution cannot help you.
Is It Possible To Get Assistance From My Bank?
This depends on the scenario. If you have insufficient funds in your account then the check will bounce. If you do have the funds and you need them for something else, you can stop the check to prevent the amount from getting deducted.
Doing so may give birth to certain legal complications. It is highly recommended to speak with an attorney before doing this.
Choosing A Payment Plan With Your Payday Lender
Most payday loans are for small amounts, and the lender usually expects you to pay it back in full. If for some reason, you can’t pay off the loan all at once, make it a point to clear it out with the lender at the start of the agreement and take it in writing from them.
Legally, if your loan is less than $400 then the tenure for your loan should be at least 90 days. If it is more than $400, then it should be at least 180 days.
When you miss payments, your lender usually charges a default fee of approximately $25. You need to make sure that your lender has not added any excess fees in the agreement or is not charging you for breaking up the installments.
Canceling Your Loan
If for some reason you decide you want to cancel your payday loan, you need to do it on the same day that you took the loan. When you cancel the loan, you need to pay back the entire amount to the lender.
In return, the lender should destroy the agreement and return the post-dated checks.
If you had set up standing instructions with your bank for deduction of the loan amount, you need to cancel it right away. Here are a few facts about canceling your payday loan.
1 Will I have to pay for canceling my payday loan?
You do not have to pay anything for canceling your payday loan on the same day.
2 What if the lender refuses to cancel the loan?
If the lender refuses then you need to contact the DFI immediately and report the same.
3 Should I stop the payment after canceling the loan if not already done?
Yes, please ensure that all standing instructions along with any checks have been canceled when you cancel your payday loan.
Questions Regarding An Overdue Payday Loan?
1 Should I opt-in for a new payday loan?
The quickest resolution to pay an outstanding payday loan would seem like taking a new payday loan.
Your payday lender may also offer to add a few days to your current payday loan, however, this would violate the law. In simple terms, you cannot take an additional payday loan to pay off your existing ones.
2 Why it is not recommended to take out another payday loan to pay the existing one?
As per Washington law, it is mandatory to clear your existing payday loan before you can avail of a new one from the same lender. This is to avoid a debt trap.
3 Are payday loans difficult to pay off?
Not necessarily. Since the amount is small, with proper financial planning you will be able to pay it off easily as long as you break it into smaller payments. You also need to check if your payday lender is wrongly adding any additional fees to your repayments.
4 How do I break the debt cycle?
Payday loans are the easiest loans to avail of. Most people consider this as their go-to plan when they are in a financial crunch. While getting a loan is easy, breaking the cycle is difficult.
The reason you are not allowed to opt-in for a new payday loan over an existing one is so you can break the cycle and escape the payday loan debt.
Closing My Bank Account That Is Linked To My Payday Loan
Closing a bank account does not require permission from your payday lender. If you do not make a payment on an existing loan, action will be taken against you.
If you want your financial record to stay clean, you can request your payday lender for some more time and also inform them that you intend to pay back any applicable late fees.
Most payday lenders are flexible and as long as they receive the late charges, they will not bother you. If they try to sue you, you may want to pay them a smaller amount to stall them till you get funds to clear the entire loan. It is important to communicate clearly with your payday lender. Here are a few tips that can help:
- Explain your situation in all honesty
- Ask them for a reasonable and realistic timeframe
- You can also ask them to increase the number of installments so the amount you repay them is smaller each month. This will also help you pay within the stipulated timeframe
- Instead of fighting with your collection officer, reason with them. They will be empathetic towards your situation.
Can You Face Criminal Charges?
Although payday lenders may say they will take criminal action against you, it is illegal for them to do so. They cannot throw you in jail or prosecute you for delaying payment.
Even if they threaten, you can contact the DFI. You can also inform the DFI if the lender harasses you or contacts you multiple times or even reaches your doorstep.
Whenever you borrow money, it is vital to know your rights and how they can be exercised at the time of need. While it is important to pay back the money you owe, you should not feel pressured or threatened if you intend on paying them back in full.