Payday loans are issued for a short time, generally between 7-30 days. The loan sum is also low compared to traditional loans. The main goal of payday loans is to provide instant money to people who find themselves in a difficult financial situation.
Generally, the customers of payday loans use the loan money to pay off utility bills, medical bills, education fees and to cover other urgent expenses.
When signing a payday loan contract it is necessary to read carefully all the terms, especially the repayment terms. The borrowed funds are supposed to be repaid within the stipulated period of time. In most cases, the deadline is the borrower’s next payday. On the due date, the loan sum is withdrawn electronically by the lender from your checking account. If you submit a post-dated check to the lending company then it is authorized to en-cash the check on the day you receive the next paycheck.
Actually, there is one option of repayment offered by payday loan lenders – clients must repay the whole loan.
In case a borrower is unable to make a repayment in time, there is an option of a roll-over; however, these are only allowed in some states. It is necessary to check for this option in advance. For cases of non-repayment, a borrower can apply for debt settlement options available in their states.
A recent survey from by the Consumer Financial Protection Bureau as of April 2016 – Online Payday Loan Payments provided most complete information about the process of repayment and rollover percentage rate from a consumer’s point of view.
The survey confirmed that over 80% of payday loans are not repaid on time to the lender. According to the CFPB report, the borrowers have to either prolong the loan or reborrow the funds within 30 days skyrocketing the fee amount.
If a customer cannot repay the loan on the due date, he or she should inform the lender in advance and ask to extend the repayment period. In the case of the lender’s positive answer, the repayment period will be prolonged and you will have more time to manage your financial plans. However, you should know that the service of rolling over a payday loan involves additional fees and higher interest rates. So, it is better to be on time with repayment.
It is crucially important to use payday loans wisely and pay back the borrowed funds on time. In such a way you will avoid unpleasant complications.