If you've racked up payday loan debt and you're unable to meet the monthly payments, you may negotiate a settlement with the pdl lenders. Payday loan debt settlement enables you to get rid of your dues by allowing you to pay less than the balance you owe. With settlement, you can get out of the payday loan trap and avoid further harassment by pdl lenders and collection agencies.
How payday loan debt settlement works
You can co-ordinate with pdl lenders or collection agencies and settle your bills on your own. Make sure you know how much you owe in total. Just check your credit report to find out which bills are unpaid and whether the accounts are well past the Statute Of Limitations (SOL) period. Know how to settle your debts yourself.
In case you don't feel comfortable negotiating with lenders/CAs, you may take advantage of settlement services. Such services enroll you in a settlement program which requires you to stop paying your pdl companies so that you can save a certain amount each month. When you've accumulated enough cash for several months, the negotiator at the settlement company communicates with the lenders or CAs (whoever holds your accounts) so that they agree to accept an amount less than what you owe. Find the details on how debt settlement works and know about the pros and cons before you enroll in it.
Benefits of payday loan settlements
When you settle your pdls, you get the 3 benefits, as given below.
Pay less than what you owe
When you go for settlement, lenders/CAs would generally need you to pay up to a certain percentage of the dues you owe, and forgive the remaining balance. So, if you're in financial distress or you're in hardship, settlement can help to eliminate your dues.
Get relief from harassment by lenders/CAs
When you're in a pdl settlement program, you don't have to deal with lenders or collection agencies. That's because your negotiator manages all communication on your behalf. When lenders/CAs find you interested to pay at least a certain percentage of the balance, they're likely to stop harassing you with repeated phone calls.
Stay away from legal actions
With payday loan debt settlement, you can avoid being sued by lenders. Pdl companies may not appeal to court for a judgment against you. You can thus avoid getting a lien placed on your home or having your wages garnished.
Steps to take before going for payday loan debt settlement
You should take the following steps before getting enrolled into a payday loan debt settlement program:
Calculate the payday loan amount
First of all calculate your total payday loan amount. Gather all the documents from your files and folders and find out the names of the lenders, the amount you owe to each lender, penalties, interest rates, late fees, etc. Check whether or not you can afford to pay the loan amount on your own.
Go through your state pdl laws
Are you well acquainted with your state payday loan laws? If no, then you should know about them now. Each state has its own payday loan laws. Check whether your lender is following those rules. Know the USA payday loan laws
before paying any money to your lender.
Check the license of your lender
Is your lender licensed to do business in your state? If not, then you can breathe easy as you won't be required to pay the interest rates and fees. You'll only need to pay the principal amount only.
Put a hard debit check on your account
If you are unable to make payments on your payday loans or your lender is illegally withdrawing money from your checking account, then you may put a hard debit check on your account. You can also ask the branch manager of your bank to close the account. However, it is not a wise idea to do so.
Once you close your checking account, your lender may file a lawsuit against you for violating the terms and conditions of the contract. This may in turn cost you a lot of money. You'll have to spend a hefty amount for paying the attorney fees and other court-related fees.
How to select a trustworthy payday loan settlement company
You can use the following tips to select a trustworthy payday loan debt settlement company:
Check the fee structure
The first tip will be to check the fee structure of the company. Under the new settlement laws, the companies are required to charge fees in proportion to the settled debt amount. So, if you find that the settlement company is not following this rule, then it will be wise to not do business with them.
Check the certifications
Check whether the debt negotiators of the settlement company are certified by IAPDA
. The debt negotiators can get IAPDA certifications only when they have sufficient knowledge on the settlement laws.
Watch out for the affiliations
An important tip to select a good settlement firm will be to check whether they are affiliated with organizations like TASC
, etc. You should also find out whether the company is a member of United States Chamber of Commerce
Check the performance of the company
Make sure you work with a settlement company that has good success rate. Visit the official website of the company to gather information about the company. Go through the "testimonials" section (if they have any) and know whether the clients are happy with their services.
Find out if they offer service guarantee
Find out whether the settlement company offers any service guarantee to their clients. If yes, then check the type of assistance they will provide you if the settlement does not work out to relieve your debt burden. Check whether the company will refund your fee if they fail to settle your payday loan debts.
Consult your family
You can always go to your family members and ask their opinion about the settlement company you're considering to work with. You can also ask them to recommend you a good settlement company in your state.
Apart from the above mentioned points, you should check whether the company follows the new settlement laws enacted by Federal Trade Commission. For instance, under the new laws, the settlement company can't charge fee prior to settling at least one account of the consumer. They can't also make false claims about their services. You should work with the settlement company that follows all the rules and regulations.
3 Signs to help you detect payday loan debt settlement scam
The following signs can help you detect a payday loan debt settlement scam if the company:
Refuse to provide you with a payment structure
If the debt negotiators refuse to tell you how they are using your money sent to them, then it is a sign of a scam. You should stop working with that company henceforth.
Refuse to provide you with a contract
If a settlement company calls you and asks you to make a verbal agreement with them, know for sure that it is a scam. You should not send any money to the company based on the oral agreement. Ask the company to send you a proper contract. Go through the contract and read the terms and condition. If you have no problem with the clauses, then sign the contract.
Guarantees to delete negative details from your credit report
A lot of scam companies promise to delete the correct negative details from the credit report to attract customers. But the truth is, the settlement companies are not entitled to do it. If a company makes such a promise to you, move on.
In spite of the fact that settlement helps consumers reduce their debt burden, there aren't many companies offering payday loan settlements. This is because the interest rates on pdls are so high and the fees add up so quickly that it gets difficult to negotiate and reduce the balance to an amount that the consumer can afford to pay. So, most debt relief companies offer payday loan consolidation programs instead of settlement. Payday loan consolidation doesn't help to reduce the principal debt balance but it lets you obtain low rates of interest on your pdls. Moreover, the consolidator negotiates with your pdl lenders to cut down or eliminate late payment fees incurred on your accounts. The best thing about pdl consolidation is that you can clear your bills with a single monthly payment instead of making several payments each month.