If your payday loan isn’t repaid on time, it can affect you negatively both in the short term and in the long term. Before you sign any loan agreement, consider whether or not you will be in the right financial position to repay the loan and fees on your next pay period. Some questions you should ask yourself include;
1. What bills will I have due during my next pay period?
2. What part of my budget will the fees for my loan come out of? Can I pull it from discretionary or will I need to dip into another part of my budget? If so, how will it impact that section of your budget?
3. Will this be a short term solution or will this continue to affect my budget in a negative way? Will I be able to make up the short fall that will be created due to the fees?
4. Am I willing to make a financial sacrifice in other parts of my budget that have “wiggle room” to help compensate for the fees?
5. How much do I NEED to borrow? (Never request more than you need).
Even if you ask yourself all of these questions and answer honestly, sometimes emergencies or other unforeseen circumstances come up that will derail your plans. If in the event that you are unable to repay your payday loan on time, you must do the following to protect yourself:
1. Call your loan provider the moment you know you will not be able to pay back your loan. This shows good faith on your part to your lender and they will be very willing to work with you if you show initiative to solve the issue first.
2. Your lender will discuss options with you for repayment. Depending on your scenario, they may or may not waive the late fee (that you agreed to have incurred on your account at the time you signed your loan agreement) to also show good faith. If they do, make sure you do NOT miss your next repayment date or you will most likely incur the fee that time and more interest.
3. Don’t make promises you can’t keep. If you don’t think you can make your full payment in another pay period, be honest about it. Lenders need to know your limitations as well as your capabilities to provide you with the very best options for you as well as for themselves.
4. Don’t avoid your lender. That will only hurt you in the short term and possibly in the long run as well. If you couldn’t call them right away, make sure to answer the phone when they inevitably call you.
If you can’t repay your payday loan on time, you will most likely incur some kind of fees, whether from the lender themselves or possibly from your own financial institution. If you’ve taken out a payday loan online, or given your lender a pre-authorized cheque, they will attempt to collect the loan and all fees on your pre-arranged due date, whether the money is in your account or not. If it is not, your bank will probably charge you a NSF fee (which can be as high as $50 per insufficient funds transaction!) and this would be on top of the late fees you might incur from your lender if the payment is returned.
Additionally, your lender may put a flag on your account for the future, which might affect your ability to re-loan with them when your over due account is paid off. Depending on how over due your account is, your lender may then send you into their collections department, whether in-house or to a third-party. Even if your credit wasn’t “hit” during your payday loan application process, an overdue balance being sent to collections may certainly hurt your credit rating.
Complete non-repayment will affect your rating, up to seven years, where it will negatively affect your ability to obtain other types of credit. Other loans, credit cards, lines of credit, mortgages, even your cell phone company check your credit score when applying for services. If you’re in a difficult financial position, the best thing you can do to protect yourself and prevent more harm from coming is to communicate with your lender.
Some payday loan borrowers believe that because a payday loan is generally a small amount of money, that it doesn’t matter to the lender. This couldn’t be farther from the truth. Any lender, including banks and credit card companies, operate with a certain amount of lending capital and when borrowers don’t repay, it affects their ability to lend to others who are also in need of funds. Payday lenders don’t make as much money as most think (one of the common myths), especially in comparison with big banks and credit card companies. We want to be able to help you (and others) who need our services and can’t get access to more funds with those bigger banks or credit card companies, but we need to work together to be truly mutually beneficial!
So much negativity can be avoided simply by talking to your lender when issues arise. We’re here to help you!
