A lot of people choose payday loans with no brokers and no upfront fees, but sometimes they can’t manage to repay them afterwards. If you’re unable to repay a payday loan on time, you should contact your lender right away and see what your repayment options are. Repayment problems are a fact of life, and your lender knows this. Therefore, they may allow you an additional payment cycle or reduce their payments through a payment extension.
Approval of a payday loan
When applying for a loan, some lenders will require you to submit proof of identity and employment. In other cases, you may also be required to provide bank statements proving that you have the financial capacity to repay the loan. If you’ve had financial problems in the past, they may not approve your loan.
But what happens when you’re given a payday loan, and you’re unable to repay it? If you find yourself in a situation where you can’t pay the payday lender back on time, your lender can work with you on your payment schedule or reduce their fees if you contact them immediately. However, if they don’t feel this is sufficient, they may place a hold on your bank account and report you to a credit reporting agency.
What can happen if you don’t pay?
If you do not contact the payday lender right away about your repayment situation, they may be forced to take other measures against you to recover their debt.
Here is what payday lenders can do if you are unable to repay your loan:
- Refuse to do business with you again.
- Charge you fees and penalties on the unpaid balance, including an increase of at least 8% on an annual basis on the outstanding principal balances. They can also include additional fees not exceeding 25% of the new principal amount reinitiating or rescheduling a repayment plan that does not require additional payments, which causes a customer to default.
- Your payday lender may also send your file to a collection agency. This is going to affect your credit score, making it harder for you to access credit in the future.
- Take you to court to repay their loan amount plus the fees and penalties if it comes down to that point.
In general, payday loans are made by one-off transactions that include a small interest rate, typically less than 20%. But even with a small interest rate, this interest may start to add up as the days go by. In some cases, you can’t afford to pay it back as well as your other expenses and take care of daily needs.
In those cases, what should you do? You shouldn’t panic but consult a financial expert who will help figure out a solution for your payday loan problems.
Rules about contacting you
If you fail to pay your loan on time, the payday lender can contact you via phone or in person. However, they cannot use intimidation or threats to get you to pay your loan. They are also only allowed to contact you on Monday to Saturday from 7 am to 9 pm and Sunday from 1 pm to 5 pm.
The lender can also contact you by mail. The mail must contain the details of the loan, including your overdue payment, along with instructions on what to do if you cannot pay it back. They should also include information about any fees they will charge if you repay the loan late. If no written agreement or contract is signed stating otherwise, the lender cannot contact you after 9 pm.
The rules about contacting someone else
If you are not the only one liable for your loan, your creditor may contact everyone involved if they don’t get paid back on time. However, their communication methods will be limited to what’s stated in the original contract. If contact information was not provided, the lender must use alternate forms of communication such as regular mail.
The rules about using threats
When you sign a contract with your payday lender, they cannot force you to sign or agree to it by intimidating or threatening you. They also can’t threaten that they will sue you if you don’t pay them back. However, there are situations where you may find yourself getting contacted by a debt collector. That includes when you have outstanding fees or interest on your loan, and you agreed to allow contact by phone if you didn’t pay on time.