Payday loan debt settlement

 

Payday loans otherwise referred to as cash advances, can be helpful when you need money fast. But if you are not careful, then applying for a payday loan can lead you to a financial crisis. 

One advantage of payday loans is that they give you access to funds at a time when you need it the most. On the flip side, the high-interest rates and fees can increase your financial burden. Mostly, people who apply for payday loans find themselves in a tough financial position. This is all thanks to the high APRs and finance charges associated with these loans. 

At times, a payday loan can have an apr of as high as 500%. Besides that, you also need to pay the whole loan amount as soon as your paycheck arrives. This is usually not possible for so many people.

But yes, there is a solution

One option that you can consider is payday loan consolidation. The second option is a payday loan settlement. In this article, we are going to explain how payday loan settlement works.

Defining payday loan settlement

This option helps consumers reduce their payday loan debt through thorough negotiations with creditors. 

There are two ways to do this. One is negotiating by yourself. Another option is to hire a reputable debt settlement company. The company will negotiate with creditors on your behalf.  In short, payday loan settlement is a method of debt reduction, where the lender allows you to make a smaller payment than what was in the loan contract. This method is also referred to as payday loan negotiation.

How debt settlement works

 

This will depend on the approach you take. If you decide to handle the negotiations on your own, it will work a certain way. It has a slight difference from hiring a debt settlement company. Note that in both cases, the borrower needs to revoke direct withdrawal authorization. This prevents lenders from continuing to withdraw payments from their bank accounts. 

When to consider payday loan settlement

Payday loan settlement can be a good option in the following circumstances;

  • When you want the amount you owe reduced
  • When you want to stop direct withdrawals from your bank account to clear off your outstanding loans
  • When you want to regain your financial health
  • When you want to stop annoying collection calls
  • When you want to free some money and start saving

How to get real help through payday loan settlement

Payday loan settlement can help you get out of debt quickly. It all depends on the payday loan settlement company you decide to work with. 

If you decide to go with the DIY loan settlement option, there will be no one to guide you through the process. You may not know what the state laws concerning the same are. You also may not have an idea of how the payday loan industry works. There are also chances that you don’t know the negotiation tactics required for the lender to give in to the agreement. 

But payday loan settlement companies are experienced and can handle the negotiations successfully. This is the reason why you should know the most important features of the best company.

Characteristics of reputable payday loan settlement companies;

  • They do not charge any fees upfront
  • They follow all the FTC guidelines
  • They have a lot of positive reviews from past clients
  • They offer a manageable fee structure
  • They know all the state laws concerning payday loans
  • They have succeeded in most of their cases
  • They have an IAPDA certification

The benefits and drawbacks of payday loan settlement

 

Benefits

  • You will eventually pay a lower amount than what you originally paid
  • You will avoid paying finance charges and late fee charges
  • You can save money
  • There are no upfront charges
  • Collection calls will stop
  • It reduces financial stress
  • You will pay off your payday loans fast

Drawbacks

  • There are so many scammers in the industry. You should therefore be cautious when choosing a payday loan settlement company
  • You must adhere to all the instructions laid down by the payday loan settlement company

Here is the best offer you can get for payday loan settlement

  • The amount that you will eventually pay should be lower than the original amount by 50%
  • You won’t pay the additional finance charges
  • The payday loan lender should be willing to update your credit report. The report should have this entry as paid as agreed or paid in full

 

Here is when you should say no to a payday loan settlement offer

  • When both parties do not have a written agreement
  • When a lender you work with did not follow the state laws concerning payday loans
  • When the payday loan settlement companies don’t adhere to the FTC laws
  • When you cannot afford the new repayment plan
  • when the payday loan debt is invalid

Will a payday loan settlement program affect my credit score

You may notice a drop in your credit score. After all, you are not repaying the full loan amount. However, poor credit should concern you are the moment. It is the high-interest rates that continue increasing on your payday loan balances that should worry you more. Soon, you may even require a new payday loan to either repay the old loans or cover a short term expense. But once you settle all the loans, it will be easier to rebuild your financial life.