Agressive Payday Loan Practices
Ever been in debt and unable to make payments? You probably already know what it’s like to deal with collections agency and their threats. Payday loan collections practices are pretty similar to other unsecured creditors. I know some people have told me some horror stories about how aggressive payday loan collection practices were, but turns out they’re really no different than other companies. Generally, if you default on your payday loan, they’ll start by sending you letters and calling you to remind you of your debt. If they begin calling your work, you can usually stop all the telephone calls by sending the company a cease and desist letter, which requires them by law to stop.
If you still don’t pay, the collection agency may eventually file a lawsuit against you. State law then dictates what type of action the company can take against you, but you’ll probably be faced with wage garnishment or property liens. I’d highly recommend avoiding any kind of law suit, it will only make your credit situation worse. Even before the company starts sending you letters you should try working out a solution with them. By working with the company, you may be able to work out a payment plan to slowly pay back your loan and avoid any further problems. Of course, your best option is to never let your loan default in the first place.
Tips to Avoid Defaulting
There’s really only one good way to deal with collections and that’s to avoid ever giving them reason to contact you. I completely understand the need to take out a payday loan, I’ve used them before myself, but only when I absolutely had to. After that, I got my next paycheck and paid them back right away. You shouldn’t take out a payday loan unless you really need the money and know you can pay it back quickly.
Also keep in mind that you’re basically borrowing this money from yourself because it will come out of your next paycheck. That means you might be a little strapped for cash after you pay the money back to the lender so plan your finances carefully or you’ll be borrowing again. It’s a cycle you want to avoid because all too often in ends in a debt you can’t pay back and a collections agency giving you a call. Try planning a weekly budget and follow it strictly so you know you’ll have enough money to pay back your loan. If it looks like you’re going to have trouble paying your debt back, talk to the company directly and try working out a payment plan. You might have to pay a little higher interest, but the company may give you several months to pay it all back.
In the end, it all really comes down to you being responsible with your money. If you are, you’ll never have to run in to a collections agency.
Payday Loan Collection Practices
Getting Sent to Collections
There may come a time when you cannot pay your payday loan back, even though you have the intention of doing so. If you have ever been in debt and can’t make payments then you know what it is like to deal with collections.
The process of payday loan collections is very similar to other collection cases on unsecured loans. They always start out the same way. You will first get a letter and a phone call where they will remind you of your debt that you still owe. If they start to call you at home and at work, and they do it quite frequently, then you can send them a cease and desist letter. This is a lawful way to tell them to stop and it will give you a short amount of time to gather money without them calling you. If you neglect to pay your loan, however, then you may find that a lawsuit will be filed against you.
The following process is only dictated by your states current laws on the subject. This will determine what action the company can take against you. You probably can expect some kind of wage garnishment, which is where the government takes a portion of your paycheck each week and gives it to your creditors. Obviously, you know what type of effect this could have your credit and your credit score, which means this situation needs to be avoided at all cost.
How Do I Avoid This Situation?
The best way to stop this situation: pay your loan on time. You need to avoid giving them any reason to ever contact you about the missed payments on the loan. If this is not feasible, then you need to contact the company as soon as you realize that you will not be able to pay back. Most payday loan companies will work with you and put you on a payment plan of some time as long as you’re honest and upfront about it from the beginning.
As with any situation in life, proper communication is key to working with payday loan companies (or any other type of creditor). If you try to “run and hide” by refusing to pay your loan back and ignore the phone calls and letters they send you, they will probably try to make life very difficult for you.
Today’s Takeaway (lessons to remember):
- Pay your loans on time.
- If you cannot pay your loans on time, communicate with your lender
- They will likely help you set up a payment plan of some type
- Whatever you do, don’t ignore them — it’ll just make your life more difficult!
How Payday Loans Work
Have you ever had to deal with the burden of an unexpected bill or an expense you can’t afford to pay? Most often, people take care of these issues with a credit card, but some of us don’t have a credit card or have already used all of the available credit. It’s in these trying situations that many people turn to payday loans.
In the 1990’s, payday loan companies became very popular and can be found almost anywhere today, including online. Payday loans go by many names; some refer to them as cash advance, check advance loan, or a deferred deposit check loan. In general, they are all the same thing, a small and short term loan. The loans are usually borrowed for only a week or two, as you typically pay them back after you’ve received your next paycheck.
Payday loan lenders make most of their money through the interest they charge on the loans, which is much higher than a typical loan since the money is borrowed for a much shorter amount of time. Though the interest rates range from company to company, typically it is about $15 dollars for every $100 borrowed. They’re unlike every other type of loan because they’re the only ones that offer cash right away, where other loans would give you a check after several weeks or even months.
How Do I Get a Payday Loan?
The main reason why payday loans are so popular is because of how easy and convenient they are to get. You can have thousands of dollars in debt and a terrible credit score, but you can still take out a payday loan. For some people, it’s the only type of loan they are capable of getting.
Taking out a payday loan has become a very simple process. All you really have to do is go to a payday loan store with your ID, a pay stub from work, and possibly a bank account statement depending on the lender. From there, you’ll simply fill out some paperwork and you can get your loan in a matter of minutes. Some lenders will take your debit card number or ask that you leave a postdated check, that way they can simply take the money from your account one the date it is due.
Lenders differ in how much they allow you to borrow, some only offer increments of $500, while others may let you any amount up to $1500. If you are unable to pay back the amount of the loan, you may be asked to take out another payday loan for the amount you have left to pay.
Some consumers have found themselves paying much more than the original loan amount by not paying back their loans on time. In the past several years, some payday loan companies have even taken their service online. Now you can actually take out a payday loan from your own home and the money can be deposited directly in to your account the same day.
Needs vs. Wants
Recently, I had a friend tell me he was thinking about taking out a payday loan to use for the next couple days before his next paycheck. I asked what he needed it for and why it was so urgent. It turned out he just wanted it so he could go to Best Buy and buy a Playstation 3!
I asked him if he needed a PS3 immediately. Obviously, he didn’t need a PS3 — he wanted one. You can get a payday loan whenever you want and for whatever reason you want, but that doesn’t mean you should go out, get a payday loan and then buy all the electronic gizmos you want. Payday loans are meant to be used in situations where you have to get cash on the spot because of a pressing need, which he didn’t have. They’re meant to be a quick fix to help you get past pressing needs until your next paycheck…and I don’t think I have to tell you that a PS3 is not a pressing need!
In the case that you are financially stable and need some money for a few purchases, there are probably better ways to go about it.
Tips for Managing Your Finances
- Set a weekly budget for yourself. Figure out how much money you typically spend each week, and then try knocking $25 off it. This way you’ll still have some money before payday.
- Start a spare change jar. Every time you get change for a purchase, throw it in the jar and see it what it adds up to every couple weeks. If you use a debit card more than cash, sign up for a bank account that rounds up your purchases and deposits the change in a savings account.
- Try cooking food instead of eating out or buying prepackaged meals. It’ll take longer but is healthier and much cheaper.
- You’ve heard it before, walk or take public transportation instead of driving. You’ll save money on gas and help the environment too.
- Find one thing you can do without or a cheaper substitute for it. For instance, get a lower cell phone plan, cancel the extra movie channels on your cable subscription, find a cheaper gym membership, etc.
Does A Payday Loan Show Up On Your Credit Report?
Your credit report is very, very important. It’s the main factor in determining your credit score, which in turn helps you out in all kinds of financial matters. Most people keep a close eye on their own credit reports, because a good credit report can help you secure auto loans, home loans, and other types of financial help.
When you apply for and receive a payday loan, does it show up on your credit report?
Payday Loans and Your Credit Report
Remember, if you do not pay back your payday loan it can then be taken to collections by the lender. This is definitely something that you want to avoid because it will end up on your credit report. Anytime you have something taken to collections it will result in a negative mark being put on your credit report.
Now, can a payday loan show up on your report and help your score? Typically, it won’t be included on your credit report as a positive — but the important thing to remember is that it won’t be included as a negative, and that’s always a positive! Plus, people can see that you handled your loans correctly and that you are not a big risk. It will help by showing people that you have experience with short term loans and you paid it off with no trouble. It is always good to show people that you have a good history of dealing with loans, whether they’re short-term payday loans or another type of loan.
The Dreaded Trap
Anytime you run yourself into any kind of debt, you will have a negative impact on your credit score. That’s why it’s important to keep a close eye on all your personal loans, whether it’s a payday loan or an auto loan or anything else. They can really add up. Avoiding debt should be your number one goal!
In short, payday loans can have a negative effect on your credit report, but only if you refuse to pay it off. If you’re responsible and pay off your debts in a timely manner, then you’ll have nothing to worry about, and your credit report will remain spotless!
Fighting Payday Loan Fraud
As you know, financial decisions often have the thought of fraud looming large. Fraud is something you want to avoid at all cost. When dealing with payday lenders, should you be afraid of getting scammed? I’ve listed a few ways that someone may try to fraud you out of money when you go for a payday loan below.
Dealing With Fraud
Like any other industry, there are some less then reputable companies out there. They just want your money and they do not care how shady they are when doing it. These are some of the ways you may be able to figure out if you are dealing with shady payday loan companies:
- Some companies may ask you to pay a lot of fees when getting a payday loan. These fees could include an application fee, insurance fee, and possibly a processing fee. If a company asks you to pay a fee when applying for a payday loan, do not use them — they’re trying to scam you out of cash.
- If they prefer for all the funds to be untraceable, take note. There is probably a reason they do not want to go through the proper channels.
- If you have to call a 1-900 number in order to get a hold of them then you may want to back off. Why would they require you to call a toll number? Because they want to get as much cash as possible from you. Stay away from these types of companies.
Make Sure You are Protected
It is so important to make sure they everything goes properly when dealing with a payday loan. After all, you need the cash for a short-term fix, and if you get scammed by a shady lender it’s going to make things a lot more difficult, when all you need is a little help.
Below I’ve listed two payday loan lenders with no credit check and online applications. All of these companies are trustworthy and I highly recommend them.
- MyFamily: Get up to $1500. This company specializes in payday loans for families.
- Thatcher-Prescott: A very reputable lending company. You can also get up to $1500 with them, and they have excellent customer service.
Online Payday Loans With No Faxing Or Credit Check
Here are a few good options to consider if you’re searching for online payday loans with no faxing or credit check:
- My Life Cash — Get up to $1500. They have a very well-designed site and you’ll have no trouble getting cash quickly with them.
- EZ911Cash — A very popular site. No credit check, no faxing and an easy application. Worth a look.
Will My Payday Lender Contact My Employer?
Taking out a payday loan is a private matter, I can definitely see why you might not want other people to know about it, especially your fellow employees. The question of whether or not your payday loan lender would contact your employer depends on that company’s specific policies. Your best bet is to simply ask the company when you go to take out the loan or check the company’s policies online if available. In my experience, I’ve found that the majority of payday loan companies do not contact your employer. They’re highly aware of the sensitive nature of a payday loan so generally you can assume they won’t contact your employer. However, there may be certain situations where they will have to.
For example, most companies ask that you bring in a recent pay stub to show that you are employed and have a steady income. A company may contact your employer just for proof of employment if they have any issues with your pay stubs or you cannot provide them. Another situation where your payday lender could contact your employer is if you fail to pay back your loan and do not contact the lender. Eventually, your debt will get sent to collections and they will often take any means necessary to get in contact with you. This means calling you, sending you letters, calling any references you listed on your application, and contacting your employer. That’s a situation we’d all like to avoid, so make it easy and pay your loan back as soon as possible.
What If My Lender Does Contact My Employer?
If your payday loan lender does contact your employer, they’re probably doing so for good reasons, such as the one’s mentioned above. In the case that you aren’t able to pay back the money when it’s due and a collections agency begins contacting your employer, you should write them a cease and desist letter. By law, the collections agency and lender will have to stop contacting you and your employer. Beyond that, the only other reason your lender would contact your employer is for proof of employment and income, in which case they probably would not even explain that the verification is for a payday loan.
All things considered, you can probably assume that your payday lender will not contact your employer as long as you pay the loan off on time and provide them with accurate pay stubs, but if you’re worried about it, just make sure to ask the company about their privacy policies.
Can I Pay Off My Payday Loan With A Regular Loan?
If you’ve ever taken out a payday loan, you know it can sometimes be difficult to finally get it all paid off. Since you’re borrowing money from your next paycheck, you have to make sure you can make that up, plus the added interest. It adds up pretty quickly and if you’re not careful, you can find yourself taking out multiple payday loans till you finally catch up.
Some people may even be tempted in taking out a much larger bank or government loan in order to pay off the payday loan debt. If you happen to be in a situation where you can’t keep up with your payday loan debt, you could consider taking out a regular loan to pay it off as they almost always have a lower interest rate. However, one of the main reasons people don’t do this is because these loans require at least an average credit score and many people who take out payday loans already have a poor score. In most cases, they’ve already tried to take out a regular loan but can’t get approved for it, which is why they turn to payday loans.
It’s important to remember that payday loans are only meant for short term financial problems and should be paid back promptly, otherwise the debt will add up quickly. Since many people can’t get approved for a regular loan to pay off their payday loans, they often take other measures to make payments.
Other Ways to Pay Off Payday Loans
You don’t have to continue taking out loan after loan in order to pay your debt off. Follow some of these tips to help save money and pay down your payday loan debt.
- Your first step should be borrowing the least amount of money as possible from the payday loan lender. Don’t take anymore than you need or you’ll be paying more in interest.
- If you find yourself going back week after week to take out payday loans, set goals for yourself to slowly borrow less. For instance, make it top priority that you take $50 less each time you borrow.
- While you may not be able to take out a regular loan, try applying for a couple credit cards. You may be able to find some that offer a low introductory interest rate or other benefits.
- In case you aren’t already doing it, you should be cutting every corner you can financially. Use coupons, by generic, no major purchases, etc.
- If you’re completely unable to lower your payday loan debt, you might consider a debt consolidation or debt management counseling program to help you.
I’m 20 years old — should I get a payday loan?
As long as you’re at least 18 years old, you’re capable of getting a payday loan, but whether you should or not is another question entirely. First, you should ask yourself a couple of questions; most importantly, do you have a steady job and steady income? Every payday loan company will want to see at least one of your recent paychecks as proof that you are employed and to help determine how much money to lend you.
At 20 years old you probably don’t have a large weekly income and you may not get approved for a loan higher than $500. Think about how much money you are looking to take out and if you’ll able to pay it back promptly, typically within two weeks. This is where many people make a mistake, if you’re taking out a payday loan a week before you get paid next, make sure you understand that you won’t really be receiving a full paycheck for another three weeks, assuming you are paid bi-weekly. If you take out a loan for all or most of what your future paycheck will be, understand that three weeks is a long time to go without any cash flow, so you’ll want to be careful financially during that time period. Also, consider why you’re taking out the loan and if the reason is really worth it, you might reconsider if you’re using it just to go shopping.
Reasons for Getting a Payday Loan at 20 Years Old
While some people might think you don’t really have any good reasons for needing a payday loan at just 20 years old, there are actually many legitimate reasons. Let’s say you have to drive to work and school every day, but one day your car breaks down. You take it to the shop only to find out the repairs will cost you $1200. Even though you’ve got some money saved up for such an occasion, you’re short $400 and don’t have enough room to put it on your credit card. A payday loan would make perfect sense in such a situation.
Or, maybe you’ve got your phone bill and power bill due the same day, but you don’t get paid for another week. Rather than receiving what could be over $50 in late charges, you could take out a payday loan to take care of the bills. The amount of interest charged on the payday loan would most likely be less than the late fees and you wouldn’t run any risk of damaging your credit score. A payday loan can also be very useful if you need the money immediately, maybe you’re about to start school but haven’t purchased your books yet. You could a payday loan online in a matter of minutes, the money would be waiting for you in your account and you could get your books the same day.
These are just some of the many situations you may find yourself in at 20 years old and a payday loan is the perfect solution to all of them. So if you’re young and wondering if you should get a payday loan, the answer probably depends on what you’ll be using it for and whether you can afford to pay it back, but there’s really no reason why you shouldn’t get one if you want one!