Payday Loans Repayment Options
Payment alternatives to consider if the things go wrong and you can't pay back your loan on time!
Loans are an easy way of getting fast money. Exist plenty of lenders eager to help desperate people. According to a recent research, from a total of 100% payday borrowers, only 14% can afford to pay back cash loans on time. The rest of borrowers do not have means to exceed the $50 limit per two weeks. Loans tend to pile up in this case and the original payday loan being followed by another five to seven other loans, is a common thing.
However, there are other ways of dealing with loans. Some of them are costly, others take more time, but all options are worth thinking when a due date is getting closer and the borrower has no money.
Extended Payment Plan – EPP
EPP is a good choice if a lender is part of Consumer Financial Services Association of America (CFSA). CFSA has Best Practices Guidelines that allow a payday loan borrower to ask a lender for the EPP. In other words, the client may extend its due date, at no extra costs. The critical moment in this scheme is not to miss the payment due date and apply for the EPP. The deadline is the last business day before due date.
The borrower and lender will sign a new agreement. Depending on the way customer applied for a loan, the process will need to be repeated once again. For store-front loans borrower signs EPP at the lender’s office and for online loans – via an online form. About 9,000 of storefront lenders are CFSA members, so choosing from the very beginning one of them is a good idea in the long run. EPP is available for consumers only once in 12 months.
Rolling over a payday loan or loan renewal, shifts loan due date for a high fee. The borrower gets more time for paying off loan principal plus renewal fees. Rollovers are very common, but low-income borrowers got trapped in debts, living from one renewal to another. Some states forbid payday loans renewal, as a measure of protection from predatory lenders. From all states, 22 ban rollovers, while 3 allow them with no limits of the maximum number.
Therefore, we suggest to use loan renewals as rare as possible. Once you have decided to rollover a loan, contact your lender. Check up the fees, the number of allowed rollovers and new due date before signing a new contract.
Payday and installment loan refinancing
Payday loan refinancing is a process of getting extra funds to extend loan due date. A borrower must pay off current finance charges on loan and a part of its principal. Not every state in the US allows refinancing. Moreover, no lender is obliged by law to refinance a loan, so it is all up to lender’s decision. Contact your lender and find out if this option is available. After filling out loan refinancing request, you will receive a new loan document with the approved amount of funding, the principal of refinancing, fees, new due date and total owed amount.
Similar to cash loans, the installment loan refinancing means time extension for repaying the loan plus extra financing. In some states, borrowers will need to pay off their loan principal partially.
Alternative funding sources
Sometimes help can come up from where you least expected it. There might be other sources of extra funds like friends and family, credit unions, banks.
Other times, bankruptcy is the best choice for relieving of debts you are unable to pay off. As harsh as it sounds, irresponsible borrowing often leads to bankruptcy. However, bankruptcy is possible in case of any loans, in spite of what some unfair lenders may suggest. Payday loans’ borrowers aren’t treated differently from personal and installment loans’ ones. The procedure begins with getting a government-approved credit counselor through the U.S. Trustee Program. The cost is about $50, which is paid for the counseling rate. However, these services may be free of charge, due to consumer’s inability to pay for it.
The credit counselor will evaluate the borrower’s current financial situation and come up with a personal budget plan. He will also look into available alternatives of declaring bankruptcy. This may include a negotiation with lenders or debt consolidation. If none of the above is possible, the borrower will be declared bankrupt, with all the consequences involved.