Sometimes a payday loan can seem like a logical small term loan that can get you by until your next paycheck. Although they are relatively easy to obtain, they can be tremendously difficult to pay off should you go into default. Make sure you are aware of personal loan default consequences and terms before acquiring this type of loan.
Payday loans are unique in that they are generally small, short term loans that require no collateral aside from your next paycheck. Most individuals turn to this kind of loan when they are unable to make ends meet with their current paycheck. They agree to repay the loan by the time they receive their next paycheck, which is usually within a one to two week period.
When you receive a payday loan, lenders will usually ask for a postdated check equal to the amount of the loan, the interest, and fees. The funds that the borrower receives, usually a few hundred dollars, are issued. Upon the expiration of the loan period, the borrower can repay the loan amount and fees in full, roll over the loan, or opt for a payment plan
Payday loan Repayment
Some states allow lenders to provide a payment plan for borrowers who are unable to repay their payday loan on time. The repayment timeline for payday loans varies by the company, but most will impose a minimum loan life of 2 weeks and a maximum life of approximately ninety days. Keep in mind that the high interest rates will carry over into any new payment terms to which you agree. Most Americans who find themselves in impossible payday loan debt opted into a payment plan that they could not afford.
In some states, roll over payday loans are legal. This means that the borrower provides the institution with the necessary funds to repay the loan. He or she then receives a new loan and agrees to repay it after receiving the next weeks pay. As long as the borrower pays all fees in full each week, he or she may continue to do this indefinitely. The drawback is that some fees may continue to be applied each time the borrower rolls over the loan.
What Happens if I Default on a Cash Advance?
If you dont pay a payday loan on time, your loan status will go into default. Payday loan default can become quite serious over a short amount of time. The nature of the loan ensures a quick downturn for your credit and finances if not paid for in a timely manner.
When you default on a payday loan, the lending company will first attempt to deposit the post dated check you submitted when you first received the loan. Remember, even if you have deposited your paycheck into your checking account, the post dated check is comprised of the original loan amount as well as additional fees. This means that if you do not have additional funds available in your checking account, your check will bounce.
Both your bank and the payday loan company will charge you insufficient funds fees. The payday loan institution may or may not make further attempts to obtain the delinquent funds via your bank account; it is possible they may press charges.
If you fail to comply with the repayment agreement, you could be sued. Usually, the result of a compensations case is that the borrower is forced to pay the delinquent sum. If he or she is unable to pay, the court may require the garnishing of the borrowers paycheck until the funds have been paid.