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Dealing With Payday Loan Debt
If you took out a payday loan and you are struggling to repay it, it is a sign that you need help. This is especially true if you have more than one loan. If you try to borrow your way out of debt, it will only make the problem worse. We would never suggest that you take out a payday loan to repay your debt.
There are times that you will need extra money. If you are considering taking out a payday loan, you should first look into other alternatives to see if there is another, more affordable way to borrow money.
How Do I Deal With Payday Loan Debt?
If you have taken out a payday loan and you don’t have the money to repay it, you should never take out another one to pay it off. Most payday loan companies will take you bank card details so that they can remove the payment directly from your account. This type of payment is called a continuous payment authority (CPA).
If the money is not in your account and your payment is declined, the lender might attempt to take it again. Unless an agreement has been made between you and the lender for an extension or a rollover, the lender can only try to deduct the money from your account twice.
If you need to borrow money for food, a bill, or any type of credit, a payday loan can help you get through the month. You should understand, however, that the next month you will have the same amount of money going out and you will need to repay the payday loan also.
We have had more and more people come to us who need help paying off multiple payday loans. This cycle can only result in a larger debt problem. If you find yourself in this situation, it is best to cancel the payday loan payment as soon as possible to keep it from being deducted from your account. You can then get expert advice regarding what you should do next.
What Is a Continuous Payment Authority?
When you give your debit or credit card information to a company, you are authorizing them to take regular payments from you. This is known as a continuous payment authority (CPA). It is also known as a recurring transaction. These work like regular debts and they can be difficult to cancel. Also, they don’t offer the same guarantees if the payment date or amount were to change. This means that the lender can take as much money as they would like without giving you any notice at all. Unless a rollover was agreed upon, the lender can only attempt to take the money from your account twice.
What Are Rollovers?
If you have taken out a payday loan and your money is about to become due, the lender will offer you the opportunity to roll the balance for another month. While this may sound like the perfect solution to your problem, you should understand that the rollover comes with additional costs and charges. This can make repayment even more difficult.
According to the law, you cannot rollover and outstanding payday loan more than twice. When you do request a rollover, the lender is required to send you an information sheet with the contact information for debt advice organizations who specialize in payday loan help.
If you are struggling with payday loans, we can offer you free advice and help with the debt. Payday loans are advertised as a simple form of credit. This is only true if the balance can be paid on time and if they are used responsibly. If you cannot repay the loan on time, you can find yourself in serious debt.
Five Steps To Get Out of Payday Loans
When a person is trying to get out of a payday loan, they will often think that the answer is to take out another payday loan to pay off the first This is a bad idea, but it is very common. We understand that being in debt with a payday loan company can be scary. If the repayment date is approaching and you cannot pay, we can help. There are 5 steps that you should follow to help you deal with payday loans that you cannot afford to pay.
Step 1: Don’t Panic
Many payday loan companies advertise themselves as a way to pay an unexpected one-time charge, like a car. The reality is that 4 in 10 people who take out a payday loan do so to pay for essentials, such as food and gas. Just a quarter of the people who take out payday loans do so because they are struggling to repay another payday loan. If you are in this situation, don’t panic. We can help you to get out of debt without taking out any more debt and you are not alone.
Step 2: Stop the Borrowing Cycle
The trap that many people fall into is not being able to afford the original payday loan. When they feel like they have no way out when they cannot afford to repay, they take out another payday loan and then another after that.
It is important that you stop the cycle immediately. If you keep taking out payday loans, it won’t fix your problems. When you draw the line and stop taking out loans, you will keep yourself from slipping deeper and deeper into debt. You can then focus on the debt that you do have by taking the following steps.
Step 3: Cancel the CPA Payday Loan Payment
A payday loan is considered a non-priority debt. This means that it should only be paid after you have paid your essential bills such as your mortgage, car payments, household bills, food, and your living expenses. If repaying your loan means that your essential bills won’t be paid, you should stop the money from being taken from your account.
When you applied for the loan, you will have given your bank the authority to set up a continuous payment authority (CPA). This is how the payday lender will take the repayment. The CPA is the lender’s direct line to your money. They can take the money whenever they want. If there isn’t enough money in the account, they can try to take the money over and over again. If there isn’t enough money in the account, you can be charged bank fees which will put you further in debt. If you cannot afford to repay the loan, you should cancel the CPA and it is relatively simple to do.
- On the day the payment is due, contact your bank and ask them to cancel the pending payday loan payment.
- If the payday loan is due in 1 to 5 days, send an email to the bank using this template.
- If the payday loan is due in over 5 days, you should send the template letter to the bank through the post office.
- To keep the payday lender in the loop, you should also send them a copy of the letter that you are sending to the bank. Be sure to do this after the bank has already cancelled the CPA.
As mentioned above, payday lenders cannot try to take the money from your account more than twice, unless a rollover has been agreed upon by both parties.
Step 4: Repay Only What You Can Afford to Pay
One of the most common complaints that people have about payday loans is their collection process. In reality, you cannot be asked to repay more than you can realistically afford. We can help you determine how much money you can afford and we can also help you prove this to the payday lender.
Step 5: Live a Life Without Payday Loans
Once you have stopped the payday loan cycle, you have finally retaken control of the situation. We can offer you budgeting help and debt advice through Debt Remedy or over the phone. This can help you manage the amount of money that you owe based on your income. We will also help you do this without getting deeper into debt.
We can also help you budget for your bills that are priorities. We ca help you clear any arrears, we can help you budget your money for future payments that you owe, and we can provide you a range of debt solutions to keep you debt free in the future.
The reason most people take out payday loans is because they are desperate. Fortunately, there is a way out. When you follow the steps above and then get help from a debt expert, you can start living a life free from payday loan debt.