Payday Loans Debt Consolidation

How To Decide If You Should Sign Up For A Payday Loan Debt Reduction Service?

If you are looking out for a payday loan debt reduction service, it means you are over stressed because of the mounting payday debt problems and you are unable to deal with the same on your own. The good news is that there are several organizations available out there that are more than willing to assist you on how to reduce your debt burden faster. It is just that you will have to make sure that the company you have chosen for debt reduction service is a genuine, legitimate and highly experienced one with impressive success record. At the same time, you must also be well aware of the federal as well as state laws regarding such services. It is also important to note that there can be certain tax implications as well when a lender agrees to reduce your write off your debts. Likewise, you will also have to do a thorough review on how your credit score will get affected when you sign up for such programs. Following is a brief rundown on some of the important steps that you must follow in this regard.

License From IAPDA

The first thing that you have to do is to find out if the payday loan debt reduction experts that are going to take care of your debts are duly licensed with the IAPDA, which stands for the International Association of Professional Debt Arbitrators. You may come across many financial experts who claim to be very successful debt negotiators but fail to present any proof when you request them to. So, you should always avoid self-claimed payday debt reduction specialists. Though the license from IAPDA does not guarantee that the expert you are hiring is the best one, it definitely guarantees that the expert is a legitimate and well trained one in this subject area.

It is very important for you to understand that there are certain laws both on federal and state levels that govern the debt industry, including payday debts. IAPDA-licensed Debt negotiators are trained in all those laws. It means they are well aware of all the legal options that can be tried to reduce your payday debts.

Membership Of TASC

TASC stands for the Association of Settlement Companies. A reputable payday loan debt reduction company will always have a membership of TASC. The best thing about the TASC membership is that it ensures that the company meets very high standards (as set by the TASC) and follows ethical principals to manage payday debts for consumers. The debt negotiators from such companies will always disclose all the terms and conditions clearly to you through a written contract. Other negotiators who claim to be payday debt reduction specialists but are not members of TASC may surprise you with charges and provisions that were never discussed in the agreement.

The BBB Rating

In order to be on a much safer side, you are also advised to check the ratings of the payday loan debt reduction company as maintained by the Better Business Bureau (BBB). A legitimate business, including the ones that offer debt reduction services, always gets it registered with the BBB. The BBB has set certain quality and ethical standards which its members must follow. The Better Business Bureau also issues ratings for its members depending upon the quality of the services offered by them. For example, if a company has been very bad in delivering the services as promised and if there have been lots of complaints against them, they will be assigned the BB rating of anywhere between “D” and “F”. Companies with “A”, “B” and “C” ratings are the best ones. The higher the ratings, the better services you can expect. Overall, these first three steps will ensure that you are working with a legitimate and reputable company.

Tax Implications Of Payday Debts That Are Written Off

A payday loan debt reduction company may succeed in convincing some or all of your payday lenders to write off the entire or at least a certain part of your debts. When lenders write off certain debts because the borrower fails to repay the same for a very long time, the amount of debt that is written off is treated as a taxable income for the borrower. It means if certain part of your payday debts are cancelled, you will be liable to pay taxes on that amount of money. It is legally mandatory for all commercial lending companies, including those that issue payday loans, to report about such cancellation of debts to the IRS by filling out the 1099-C form.

Effects On Credit Score

There are several factors that determine whether the payday loan debt reduction service you are using is going to have positive or negative effects on your credit ratings. In general, the effect is always negative and a very damaging one. The negative impact is obvious when the lenders report about the reduction in your debts (because of your financial inability to make the full repayment) to the credit bureaus. The entries that explain these things on your credit report will hurt your FICO score very badly. The only way to protect your credit ratings is to hire those debt negotiators who can convince your lenders not to report negatively about any debt reduction agreement that takes place between you and them. In fact, you can even improve your credit situation if your lenders agree to report the payments made by you (even if it is a reduced amount of money as compared to the actual debt you owe) as “paid in full”.

Overall, if you keep in mind the above things and act accordingly, you will definitely be able to choose the best payday loan debt reduction service for you.


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