Repaying a payday loan is generally a very simple process. You borrow a set amount of money (usually anywhere between $100 and $1,500) and repay the debt when you receive your next paycheck.
In some cases, however, payday loan repayment terms can be more complicated than that simple scenario.
How Much Can You Afford to Borrow?
The first thing you need to consider when applying for a short-term payday loan is your ability to repay the loan according to the contract. For example, if you envision large expenses that will consume a large portion of your next paycheck, then you need to be completely honest with yourself and know that you will not be able to repay the loan in the specified time period.
Repayment for payday loans is generally cut and dry. You write a post-dated check to cover the cost of the loan, plus interest. When the loan comes due, the payday lender simply cashes your check and the loan is repaid. But what happens if the check is returned for NSF?
What Happens if You Cannot Pay Back Your Payday Loan?
A payday lender can then tack on more interest and loan fees until the loan is repaid. If the loan goes unpaid for an extended period of time, the payday lender can then attempt to collect the money owed by taking you to court. It is not uncommon for payday lenders to receive judgment against a borrower in the form of garnished wages.
Repayment Terms You Must Know
With that said, it is up to you to become educated on the repayment terms of your payday loan so that you can avoid any headaches and problems.
• A typical loan repayment schedule coordinates with the borrower’s payday cycle, as well as the amount of the payday loan. In other words, if you get paid every two weeks. then the loan will likely come due in two weeks.
• Larger loan amounts may be spread out over several pays, depending on the payday loan company’s terms and conditions. Some long-term payday loans can be extended for up to 90 days, with repayment dates occurring on every payday during the loan period.
• Most payday loan companies can arrange to have the payments for a long-term payday loan automatically deducted from your bank account according to the terms of the contract so that you don’t have to remember to pay your bill.
• Many payday loan companies also allow borrowers to extend their loan repayment up to three times. For those who get paid only once a month, this extension may be less. Payday loan companies typically charge the borrower the loan fee for the original loan at the regular due date. The loan principal is then simply rolled over into a new loan contract.
Although this type of repayment may sound tempting, it is important to realize that additional loan fees are incurred each time the loan is rolled over.
Payday loan companies often accommodate those borrowers who may have trouble paying off their payday loan according to the contract’s repayment terms, either by extending their loan, rolling it over into a new loan, or accepting a partial payment. It is up to you, however, to contact the payday lender before the loan’s due date to work out different arrangements.
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