Any person who has ever gotten behind and defaulted on payday loans can understand what we mean when we say stop payday loan collectors today!
These people can be as ruthless as possible in trying to collect your money!
This post is going to explore what tactics they use, what your rights are and what you can do to combat the collection process without losing everything you own.
The Debt Process
For the sake of everyone being on the same page, let me explain how the whole process of getting a payday loan and ending up in default usually plays out for most people.
How a payday loan works
You can get a payday loan from either an online company or a storefront company.
There are differences in how the two collect their payments from you that you should be aware of. Check out our article: Are Online Payday Loans Safe? to understand how they work and differ from storefront payday loans.
Everyone who has a job and makes over $800.00 a month with a checking or savings account qualifies.
You can usually borrow up to $1000.00 for 2-week increments with the $1000.00 and interest and counter fees due on the due date in full.
Payday loan companies offer to extend the loan for an additional time, usually the same amount of time as the original agreement by just paying the outstanding interest and counter fees.
Keep in mind the new total owed in two weeks will be the exact total of the original loan, so in essence, if you borrowed $1000.00 for two weeks and just paid the counter and interest fees due and extended the loan. ( these fees would average about $325.00)
This means you just paid $325.00 to borrow that $1000.00 for two weeks and because they re-add the interest and counter fees to the new balance, you guessed it, you still owe the whole original amount of the loan.
You can get more information on this by reading our article: What Is A Payday Loan Trap?
Once your loan is active the method of payment is in most cases an automatic withdrawal from your checking or savings accounts on the due date.
This is how a payday loan works, and where we run into trouble is most people will extend their payday loans at least 4 to 5 times before they pay them off, and about half of those people will default on multiple payday loans, having taken more than one out to cover other expenses or even to cover their original payday loan payments.
In other words, they are caught in the payday loan trap.
The Payday Loan Collectors
The first thing that happens when you default on your loan is your checking or savings account is hit for the outstanding payment even though the funds are not there.
We have seen people lose their accounts, thousands of dollars in NSF charges and even criminal charges for writing bad checks (Even though your loan is set up for automatic withdrawal of the payment, that withdrawal is considered a post-dated check, which in most states is illegal. Yes, the collectors will use that against you when needed to collect money!)
After it is clear all efforts by the collector to collect from you through your band account are extinguished they then kick into one on one collections.
The typical payday loan collector from a storefront business is the lesser of the two evils in this business, as they know they are approachable by their customers in person and most tend to follow collection laws established for collecting debts in their state instead of risking a visit from an irate loan holder who is being harassed.
Still, these guys and gals can get really aggressive by calling you at work and home, calling all of your references and even your boss and asking them to borrow you the money to satisfy this loan, and finally threatening legal action.
They have been known to threaten customers with immediate arrest unless the customer hit the pawn shop or a relative for a payment.
The online collectors are even more brutal, and since online payday loans are usually owned outside the country they can get very aggressive without worry of legal repercussions from authorities.
These collectors have been known to threaten all kinds of havoc on the borrowers unless they make a payment today and on an on.
We have covered how to get payday loan collectors off your back and out of your lives and we hope this article has helped you in understanding what these loans consist of and what to watch out for.
Remember our best advice: “The only way to safely use a payday loan is to make sure it is paid in full on the first due date period!”
Now it’s your turn!
If you have any questions or comment please leave them below and we will address them promptly!