If you have ever taken a payday loan, you might be aware of the interest rates charged by lenders. In some cases, these rates can be extremely high and virtually impossible to pay off if you are only receiving a salary every month rather than a wage.
To protect yourself from this situation, it is always best to stay on top of your payments as much as possible and make sure that any cash flow issues don’t happen too often.
The risks of defaulting on your payday loan include:
- Paying more in terms of fees and interest. For example, if you don’t have enough funds in your account to repay your debt, your lender can charge you an NSF (nonsufficient funds) fee. The sum depends on industry regulations and state laws.
- Damaging your credit score. Payday lenders don’t perform full credit reports when assessing your eligibility. However, they must report payment delays to major credit reporting bureaus.
- Being rejected on future loans. Records of your failure to repay a payday loan may stay on your credit report for as long as seven years. That is a good reason for other lenders to reject any future loan applications from you.
Losing your assets is a risk if you cannot repay your loan at all. When signing a loan agreement, you become legally responsible for repaying the money at the interest rate stipulated in the contract. You will not go to jail for failure to repay your debt, but you will end up paying more in the long term. To protect your assets under such circumstances, you can:
- Save up money by getting assistance with your rent, utilities, or food. There are governmental and community assistance plans for individuals struggling financially. You may qualify for one of them and save money to get out of debt.
- Get free financial advice from a pro bono counselor. For instance, a bankruptcy attorney will be able to guide you through a challenging path.
- Get money quickly without resorting to lenders. If your friends or family can and are willing to help you up in times of financial distress, you should let them do so.
- Learn to manage your finances better. If you rely on debts too often, you need to up your budgeting skills. It will help you save money and protect you from overspending. Keeping to a savings account will help you stay on track.
Our experts can help you handle financial difficulties of any difficulty level, including bankruptcy. The professionals with our practice have extensive experience and will clear out all your legal concerns.