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Tips for Dealing with the Consequences of Defaulting on a Payday Loan

27 Dec, 2013

Defaulting on a payday loan means that you were not able to fulfill your obligation of repaying the payday loan that you took out. This could simply mean that you missed a single payment, you made a late payment, or you avoided all of your payments all together. The good news is there are some tips you can use to deal with defaulting on a payday loan.

The Effects

Once you have defaulted, the payday lender will start to contact you in order to attempt to get their money back. Eventually, the company will most likely start to use more aggressive tactics in order to try to get you to pay up. After a while defaulting on a payday loan will affect your credit score, which will make it more difficult to obtain other loans and can increase your other payments such as insurance. If you do not repay your loan after an extended period of time then eventually you will face foreclosure, repossession and/or a collection agency.

Act Now

If you have recently defaulted on a payday loan it is crucial that you take action now and not later. The moment that you realize that your payday loan is defaulted, you should get in contact with the payday lender. Talk over the situation with the lender in detail and understand exactly what all of your options are.

Try to Workout a Payment Plan

The majority of the time a payday lender would prefer to come up with a solution to your default rather than pursue a claim. This means that they will likely be more than willing to negotiate with you and come up with a doable payment plan. It is often the case that collection and repossession situations happen due to a lack of communication on the part of both the lender and the borrower. Your best plan of recovering financially from a defaulted loan is to take action immediately.

If You Don’t Have the Money to Repay a Loan

If you are unable to make a payment on your defaulted payday loan simply because you do not have the money then there are still some steps you can take to alleviate the situation. It is a good idea to get in contact with your payday lender, since otherwise they will think that you had no intention to pay the loan, when the truth is that you do not have the ability to do so. If you demonstrate to a lender that you fully intend to repay your payday loan once you have the money, then chances are they will be much more lenient with your situation and come up with a payment plan that you can easily handle.

If Your Debt is Already in Collection

If your payday loan has already been sent to a collection agency then your best option is to get in contact with that agency in order to negotiate your payments. It is best to do this in written form and send it in the mail along with a requested receipt and not on the phone. Even if they try to contact you on the phone, it is recommended that you ignore their call. Make sure that you keep a record of any contact that you make with a collection agency. Although your credit score will be negatively affected by your debt being sent to a collection agency, you will at least be able to come up with a solution that will lessen the damage to your credit. In many cases a collection agency will be happy with a repayment of a smaller amount than the original debt.