How to Avoid the Default Percentage Regarding Payday Loans

[Jan 29, 2009.]

 

Much of the bad press that payday lenders receive centers on the default percentage regarding payday loans. While it’s true that default percentage rates can be as stiff as 200% or more, those rates only go into effect should you miss a repayment. This retroactive action is typical with any loan that you take out and don’t repay. But if you keep to a strict schedule, you can avoid these default jumps in APR, making payday loans a viable option to escape financial emergencies.

Default Percentage Regarding Payday Loans

The Center for Responsible Lending paints a dismal picture of defaulting on payday loans, as it rightfully should. The truth of the matter is that because payday lenders are giving money on the spot to borrowers with little or no collateral, there should be stiffer penalties should borrowers fail to repay their debts.

The hypothetical arrangements listed on the CFRL web site show default percentage regarding payday loans rising to as much as 391% on a $225 loan amount. But it’s important to keep in mind that this only happens if borrowers are unable to repay this loan in a timely manner. The trick to avoiding a surge in APR is to know the repayment schedule and stick to it religiously.

Also, avoid taking out more than one payday loan to assist you through tough times. The CFRL web site states that 91% of payday loan customers end up with up to five loans at any given time. That’s a recipe for disaster and should be avoided. If you’re in that dire need of financing, investigate other options.

Repaying Your Payday Loans on Time

When you apply for a payday loan, your lender should give you an easy to read schedule of when repayment is expected. This schedule is agreed upon by both parties before any money is given. Also, the default percentage rate should be clearly stated so that both sides know the process once the payday loan turns enters the default period. If you know that you’ll be unable to repay in accordance with terms, you should decline the offer and look to other avenues for financial assistance.

If you’re comfortable with the terms and accept the loan, you should immediately put your repayment strategy into action. This means setting aside a portion of your paycheck to cover repayment amounts regularly. With responsible lending comes responsible borrowing; and that’s the key to avoiding default loan rates.

Source(s)

Center for Responsible Lending, Fact v. Fiction: The Truth about Payday Lending Industry Claims

 

About Author:

Kelly Richardson is a freelance writer, marcomm consultant and digital entrepreneur. He’s written content for Fortune 500s Google, Yahoo!, Microsoft and Wells Fargo. Find out more about him at kellyrichardsoncopywriting.com.