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What to do when you cannot repay your payday loans

[Apr 15, 2011.]


If you have a payday loan, and simply cannot pay it back, it is time to look at your options. Your first step is to see whether your lender is a member of the Community Financial Services Association of America (CFSA). If they are, you are in luck. CFSA members offer customers an extended payment plan (EPP), which can buy you more time to pay off your debt.

If your lender is not a CFSA member, you may still have a way to dig yourself out of the hole. Some states require all payday loan providers to provide their version of an extended payment plan. If you know you are unable to meet your payday loan obligations, check first to see if your lender is a CFSA member, and then find out if your state regulates extended payment plans.

EPP Requirements

While state EPP requirements vary, the CFSA has seven payday loan repayment plan requirements for all members, according to the organization's web site.

They are:

  1. Borrower is allowed one EPP annually

  2. Borrower must contact lender by the last day before your loan due date

  3. Borrower must use the same method of contact (in person, phone, website)

  4. Borrower must sign a written agreement with the payday lender for an EPP

  5. Borrower must repay the payday loan in four equal payments with periodic due dates

  6. Payday lenders may not charge for an EPP unless the borrower defaults on the EPP

  7. Payday lender may not send debt for collection agency unless the borrower defaults on EPP

Payday loan repayment options

If you have already used one EPP or have too many payday loans, you should consider meeting with a credit counselor to develop a financial plan. A financial plan can help you set priorities and have a complete picture of your income and spending needs.

If you have significant debt, a credit counselor may be able to work out a debt relief plan that can get your finances on track. A credit counselor can also advise you about your options for debt consolidation, a debt settlement plan or bankruptcy, and provide a recommendation if you need to purse one of these options.

For the immediate need to repay your payday loan, consider boosting your income with overtime hours or a second job, at least until the loan is repaid. Slash all spending other than what is absolutely necessary until you have that debt paid, then begin to tackle other debt. Consider asking a friend or relative to provide you with a short-term loan or offer to provide services such as babysitting, auto repair, painting, house cleaning or any other skill you may have in exchange for the cash to repay your loan. Then, reduce other debts and begin to build an emergency savings fund as soon as the original payday loan obligation has been fulfilled.


About Author:

Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance, and business.

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