Posts Tagged ‘how to avoid Pay Day Loan penalties’

Tips To Avoid Penalties Charged By Pay Day Loan Lenders

Pay day loan lenders offer small amount of loans for a very short period of time, but they charge a very high amount of money for the same in terms of interest and processing charges. In most cases, the interest rate is more than 400% per annum. Processing fees are charged additionally. Because of the extremely high cost of these loans, people often fail to repay the same on its due date, which is often the next pay day. Within such a short period of time, if you do not arrange sufficient amount of fund to ensure its timely repayment, you are charged hefty amount of penalty charges. Besides that, you are charged additional interest at the same rate for every single day that passes after the due date. Therefore, if you have already borrowed such an expensive payday loan or are planning to borrow one, you must take certain steps in advance to make sure you have enough money in your account on the scheduled due date to ensure timely repayment. That’s the only way to avoid hefty penalty charges.

Get Overdraft Protection

You probably already have other financial obligations also and have scheduled payments to other lenders and service providers on every

pay day. In order to make sure that all such payments are processed successfully, including the ones to your pay day loan lenders, you are advised to get overdraft protection on your bank account. Many banks provide this facility, especially to those customers who have been using their banking services for a very long time. When overdraft protection is activated on your bank account, the payments will be processed even if you do not have sufficient fund in your account. It is very much like making payments to your pay day loan lenders by borrowing money from your bank, which is not a bad strategy considering banks charge very low rate on such overdrafts as compared to the penalties charged by pay day loan companies.

But, there are a couple of things that you must keep in mind in this regard. For example, this strategy can be safe and useful only in a situation where the maximum overdraft amount you are eligible for is sufficient enough to pay off payday debts in full. Otherwise, lenders will charge the hefty penalty fees directly from your bank account and will attempt for the repayment again on the next pay day. Besides that, if you have given them a check, they may send the same check for collections again and again. If those checks bounce despite your account having some overdraft protection, the lenders may keep deducting certain penalty charges from your bank account. Therefore, you must work on this strategy on the basis of the specific repayment terms and conditions you have signed with those pay day loan lenders. Review the maximum amount of overdraft protection you can get. Is it sufficient enough to pay off your payday debts?

Have A Back Up Plan

You are strongly advised not to borrow payday loans unless you have a back up plan to ensure its timely repayment. Since you will have very little time to arrange the funds for repayment, you must do your calculations thoroughly in advance. Think about unfortunate situations, such as what you will do in case you do not get your salary in time or if you lose your job.

Overall, the only way to avoid the hefty penalty charges that pay day loan lenders charge on defaulted loan accounts is by making sure that you are going to make the repayment in full on the scheduled due date successfully. If you are not sure about that, borrowing payday loans can be very risky for you.

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