Posts Tagged ‘cash payday loan cycle’

Getting Out Of The Cash Payday Loan Cycle

It is a known fact that a major part of the American consumers is trapped in a vicious cash payday loan cycle. The majority of working class Americans earns a fixed limited monthly salary and most of them face the problem of cash more often than not. When they need extra cash, they look out for easy solutions. And, when it comes to ease of borrowing instant money, there seems to be no better way than a payday loan. But, it just seems to be; in reality, there are always many better alternatives available out there. But, consumers often tend to be in a hurry and so borrow payday loans without thinking much. It is this lack of planning and rationality in their financial decisions that often pushes them into a deep, never ending cycle of payday debts. Once you are trapped, it becomes very difficult to get out of the same. Still, it is difficult but not impossible. If you implement proper strategies, do some strict budgeting, and improve your financial behavior, you can definitely take control of your mounting debt situation.

How Consumers Are Trapped Into This Cycle?

First, you must understand the process that how the borrowers are trapped into this cash payday loan cycle. The lenders try to attract consumers by making lucrative offers, such as instant approval, easy qualifying criteria, no credit checking, and other such things. When you sign up with this type of lending program, you either have to give them a postdated check or give them authorization to access your bank account so that they can directly withdraw the funds from your account on the set due date. Considering the very fact that they charge extremely high rate of interest and the borrowers are also required to pay a hefty sum of additional finance charges, most borrowers fail to repay the loan in time. This usually happens when you do not work on a budgeting plan in advance about the repayment of the loan. Once you fail to make timely repayment, the lenders start sending the same check again and again for collections, which results in hefty penalty charges, such as multiple times check bouncing fee. In case, the lenders have the debit authorization rights, they will start charging hefty sum of extension fee.

Close Your Bank Account Or Block That Lender

In order to break the cash payday loan cycle, the first thing you have to do is to close your bank account or block that lender from direct fund withdrawal. But, before you do this, you must notify the lenders in advance in writing about it. Tell them that you are currently going through a difficult financial phase, and that as soon as you will have the money, you will repay the loan.

Educate Yourself About The Payday Loan Laws Applicable In Your State

Every state has imposed certain legal rights to restrict the unfair practices that payday lenders often get involved into. It is very important for you to find out if your lenders are abiding by the laws applicable in your state. You can find detailed information about the state-wise payday loan laws by visiting the section ‘payday loan laws’ in the ‘payday loan’ category on this blog.

Try To Settle The Debt Through Negotiation

Whether there have been violation of laws by the lender or not, you always have an option to get out of the cash payday loan cycle by trying to settle your debts through negotiation. Most borrowers start avoiding their lenders when they fail to repay the loan in time, which is a big mistake. If you do so, it will only make things more problematic for you. If the lenders are violating some of the laws, such as they are charging a higher rate of interest than allowed in your state, you will be in a better position to negotiate a fair deal. Always remember, no matter how hard the lenders try to terrify you, you should never agree to pay more than what you are legally obligated to them. For example, if payday lending is banned in your state and you still have been issued a payday loan, you only have to repay the actual principal amount that you initially borrowed. You can also file complaints against illegal lenders with the Federal Trade Commission and with your state authority.

If lenders are not violating any laws and your negotiation attempts also fail, you can consider hiring an expert credit counselor or a debt consolidator. They are professionals in this field and they can guide you on how to get out of cash payday loan cycle.

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