How To Write Off Payday Loan Debt?
When a person doesn’t get enough income to cover all your bills monthly, he/she can apply for payday loans to make the ends meet. But payday loan rates are high and daily, and many people have no idea on how to cover these obligations. If you’re regularly issuing payday loans, filing for bankruptcy can help you out to write off your credit obligations.
What are payday loans?
Let’s start from the very beginning. A payday loan is an online financial product issued by a payday lending service. The loan is taken out for an insignificant term – up to 30 days. The standard loan amount is $100-$1,000, depending on the state and its regulations. You may read the comparison of short-term vs long-term loans for getting more understanding of the payday loan’ s essence.
The synonyms for a payday loan is payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan. Use it to search for extra cash when you are in demand.
What is bankruptcy?
Bankruptcy is the debtor’s inability to fully satisfy creditors’ claims. For a debtor, bankruptcy is a way to get rid of debts, delay the payment of fines, penalties and extra charges. For creditors, it is an opportunity to get at least something from him on offset debts.
Among the main reasons for bankruptcy, lawyers call:
- unforeseen life circumstances: disease, emergency, political instability, etc.;
- negligence: inefficient work of an organization or financial illiteracy of a citizen.
Bankruptcy helps write off payday loans
Bankruptcy is a guarantee of a longduration relief by charging-off of debts from payday loans, as well as credit cards, treatment and utility bills, and other types of credit obligations.
Most often, individual borrowers plunge into two types of bankruptcy:
- Chapter 7 bankruptcy (also known as straight bankruptcy or liquidating bankruptcy);
- Chapter 13 bankruptcy (requires a repayment plan from 3 to 5 years).
Key points of bankruptcy chapters
- Chapter 7 is a “liquidation” bankruptcy that doesn’t imply a repayment but does require you to trade some assets to pay creditors.
- Chapter 13 is a “wage earner” bankruptcy that partially eliminates debt while reinstating other debt through a court-approved repayment plan with the duration from 3 to 5 years.
Are there any options for writing off the debts?
Try a payday loan consolidation
Loan consolidation is a very popular service today. Consolidation is the process of combining several credit obligations into one. But in fact, this procedure is not as simple as it seems. To do this, it is necessary to collect all the data on debts together, find a lender who agrees to pay everything and provide a new loan on favorable terms.
Is it possible to consolidate small payday loans?
Consolidation of loans is most often associated with banks. Indeed, many banks offer services to combine all the current obligations of the borrower.
There is both full and partial consolidation – you combine only those debts that cause you the most concern. But you should realize that the procedure for consolidating bank loans is not a simple operation and not every bank undertakes it.
As a rule, such things are discussed with banking specialists and their own strategy is worked out for each specific situation.
The situation is different with the micro-credit sector. Due to its specifics, the huge variability of loan processing methods, payment terms and interest rates, combining several loans into one sometimes seems to be a difficult, if not feasible, task.
Ask for extended payment plans
The term “extension of a payday loan” is often used by various lenders and implies an extension of the loan repayment term. In other words, the borrower asks the lender to extend, postpone the terms of mandatory payments on existing debts. The prolongation service may or may not be provided, depending on the rules of each specific service. You can change the payment schedule or postpone the date of a one-time payment on the principal debt amount, or on interest.
In what cases will the service be required?
If there is a prolongation service in the payday lending service, you will probably be informed about this option even during the application for a small loan. If you do not have time to repay the debt by the appointed date, you can notify the staff of the lending service that you would like to use this service. It is advisable to make sure in advance when issuing a small-dollar loan – you will have such an option or not.
The most common reasons for prolongation are the following:
- loss of an income source, disease, dismissal, delay or paycheck decrease;
- physical inability to pay debts due to travel abroad, stay in quarantine and the like;
- you are an individual entrepreneur, your source of income is the sale of goods that are delayed due to changes in the terms of delivery by your partner;
- you are expanding, launching the process of business reorganization, which led to a temporary suspension of activities;
- temporary financial difficulties for other reasons.
We have collected for legal methods to write off your debts or just arrest your obligations for a month or two. All the options should be used in the case you have no other options to cope with financial obligations. Better to get acquainted with these options in more details.
Tags: finance, loans, payday loans