Many of us have found ourselves running a little too short of cash and have turned to payday loans as a means of obtaining enough money to tide ourselves over until payday.
Whilst this is a practical way to borrow for a short period of time, usually a week to a month, some borrowers have experienced problems repaying their payday loan debts.
For whatever reason you’ve encountered a problem, taking a backseat approach most certainly isn’t the answer and you’re advised to seat yourself behind the proverbial wheel, grasp it firmly with your right hand, take the stick shift in your left, apply the clutch and accelerator and head straight for a solution.
Here are four of the most common problems that borrowers have experienced with payday loan repayments and how to avoid and/or resolve them.
1. Borrowing too much
Borrowing too much, not necessarily more than you can afford to repay but rather more than you should have borrowed, is a common problem that many people have experienced.
To avoid this common problem, create a budget so that you know how much you need to borrow and how much you can afford to repay.
It’s tempting to borrow as much as the lender is willing to lend you, though you must bear in mind that you have to repay the debt and that the more money you borrow the more interest will be incurred as a result.
If you realise that you have borrowed more than you should, contact the lender and ask about making a lump sum repayment as this could reduce the total interest that will be incurred and next time create a budget!
2. Paying too interest
Like borrowing too much, paying more interest than you should have usually occurs because the borrower has failed to do his/her homework and there’s nothing that can be done about it – this time.
Next time, however, shop around for a payday loan provider that offers a competitive APR (Annual Percentage Rate) and bear in mind that loan calculators should be used as guides only.
3. You can’t make a loan repayment on time
Finding oneself unable to make a repayment on time is a problem that affects many borrowers, and not only payday loan borrowers, though there’s often a solution available.
Most lenders are reasonably flexible and you can discuss your situation with them in order to resolve the problem; moreover, payday loans can be deferred but you must realise that this will incur extra interest charges.
Whilst they won’t usually accept a lengthy delay, if there’s a valid reason for you being unable to make a repayment on the scheduled date you might be able to negotiate a later repayment date in some cases without incurring penalties.
4. You can’t repay your debt
Being unable to repay your payday loan debt can result in problems if you don’t address the situation immediately, i.e. as soon as you realise you’re going to have a problem repaying your payday loan debt.
Check to see if the payday loan provider you borrowed from is a member of the Consumer Credit Trade Association (CCTA), the Consumer Finance Association (CFA) or the Finance and Leasing Association (FLA), as the customer charter they’ve signed requires them to deal with cases of financial hardship reasonably and sympathetically.
If you can’t repay your debt you might also like to consider entering into a debt management plan – look for free assistance from a free debt advice organisation – as this might require the lender to freeze the interest on your repayments, though bear in mind that this could affect your ability to borrow again in the future.
Payday loans are a great way to tide yourself over for a short period of time but you need to
a) shop around for a suitable lender like CashSorted,
b) shop around for a competitive APR and
c) understand the risks of being unable to meet your repayment commitments on time.
What’s more, the moment you realise you’re going to experience difficulties meeting your repayment commitments, contact your lender and look for a solution to the problem – the longer you leave it the more difficult the situation will be to resolve.
Photo credits: Stuart Miles – FreeDigitalPhotos.Net