If you do not pay back your payday loan then there is a great chance that the payday loan company will send your loan to collections. These people have been known to be aggressive when they try to get back money that is owed. How do you avoid these collection practices? Also, how can you avoid defaulting on your payday loan in the first place?
Getting Sent to Collections
Now there may come a time when you cannot pay your payday loan back, even though you have the intention of doing so. If you have ever been in debt and can’t make payments then you know what it is like to deal with collections. The process of payday loan collections is really similar to other collection cases on unsecured loans. They will always start out the same way. You will first get a letter and a phone call where they will remind you of your debt that you still owe. If they start to call you at home and at work, and they do it quite frequently then you can send them a cease and desist letter. This is a lawful way to tell them to stop and it will give you a short amount of time to gather money without them calling you. But if you do not pay then you may find that a lawsuit will be filed against you. The following process is only dictated by your states current laws on the subject. This will determine what action the company can take against you. You probably can expect some kind of wage garnishment. Obviously you know what affect this will have your credit and your credit score. This situation needs to be avoided at all cost.
How Do I Avoid This Situation?
The best way to stop this situation is to obviously pay back on time. You need to avoid giving them any reason to ever contact you about the missed payments on the loan. If this is not feasible, then you need to contact the company right as you realize that you will not be able to pay back. You can then hopefully work on some sort of payment plan on your loan. This would be the most helpful situation possible. They may even make you take out another payday loan, at a higher interest rate, in order to pay back the first one. This is a less desirable decision, but it is still better then collections. You also need to formulate some sort of budget. This can be helpful in two ways. First it will help you be able to manage your money better so that you can pay back on time. Second it may help you find money that you did not even know you had. This will help you alleviate the need for any payday loan in the future. You just need to avoid collections, and do whatever it takes to do so.