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Payday loan settlement: the smart way to get out of payday loans

1. What is payday loan settlement
2. Benefits of payday loan settlement
3. How to start the payday loan settlement process
4. How to go about settling your payday loans
5. Take action if you are victimized by scam
6. Evaluate the credibility of a payday loan settlement firm

Payday loans are often considered a quick and easy way of borrowing money to meet your immediate needs. They provide instant solutions to a cash crisis, yet their high APRs can cause debtors to end up in an endless cycle of debt.

If you are already deep in debt due to payday loans, then you should consider payday loan settlement to get out of your financial plight.

What is Payday Loan Settlement?

Payday loan settlement works just like any other debt settlement program by helping you get rid of lump-sum debts by negotiating a reduced amount of money with the lender as payment in full.

If you are able to make steady payments, then settling you debt is the best option for you. Settlement not only relieves you of your debt burdens, but also helps you avoid the hazards of bankruptcy, lawsuits, and wage garnishment. But most importantly, it would help you re-establish a sound financial position.

Benefits of Payday Loan Settlement

1. Rids you of high APRs: Payday loan settlement rids you of the high APRs on your payday loans, and pulls you out of the deepening payday loan mire.
2. Debts get paid off at once: Payday loan settlement enables you to do away with your loan repayment at once.
3. Eliminate late-fees and over-limit charges: Your payment goes toward paying the principal and not into charges such as interest, late-fees and over-limit charges.
4. Effective settlement reduces your owed amount up to 60%.
5. Saves you from filing bankrupty: Debt settlement minimizes the damage to your credit score. It keeps you from having to file for bankruptcy and paves the way for restoration of your credit score with time.
6. Restores your peace of mind: Settlement may reduce those annoying creditor calls and puts you on the path to debt freedom.

How to start the payday loan settlement process?

Before you start the settlement process, take some time and do your homework.

Here are some tips you should follow while preparing for the settlement process:

• Make a list of your payday loans: Write down all the payday loans that you have taken out so far. Include the names of the lenders, the amount borrowed from each, the total amount paid to each lender, the interest, and late fees.
• Check your state’s licensing laws: Every state that permits payday loans requires payday loan companies to be licensed and maintains an online database of every lender licensed. If you discover that your payday lender is not licensed, then all you will be required to pay is the principal.
• Find out the payday loan laws of your state: In order to get your payday loans successfully settled, you should be aware of your state laws regarding payday lending. State payday lending statutes will let you know if your lenders are overcharging you or violating the law in other ways. Even a single violation by the lender gives you an advantage in reaching a settlement.
• Closing your checking account: It is not a good idea to close your checking account in order to try and force your payday lender to settle. Even if your payments are getting out of control, there are better ways to keep lenders from debiting your account. Stopping payment on your loans in order to force a settlement increases your chances of being taken to court for breach of the loan agreement and could wind up costing you the lender’s attorney fees and court costs in addition to the amount of the loan.

If you want to stop a lender from debiting your bank accounts, send a “Letter to revoke ACH debit authorization” to each of your payday lenders. You can also revoke any wage assignment agreement you may have signed and give a copy to your payroll department. But continue to pay your loans as long as you can.

How to go about settling your payday loans?

Payday loans can be settled by negotiating with the lenders yourself or by seeking help from a professional settlement company.

1. Settling your payday loans by yourself

Follow these simple steps settle your loans easily on your own:

• Inform your lenders: The very first thing you need to do is tell your lenders that you want to settle your loans.
• Convince your lender about your inability to pay: Convince the lender that you are incapable of repaying the entire amount. Once the lender is convinced, they will agree to settle. Creditors usually prefer debt settlement to bankruptcy, because settlement allows them to collect more of the debt sooner than the time-consuming bankruptcy process.
• Offer a large settlement amount: Lenders usually agree to settle debts if they are offered a lucrative settlement amount. So, it is advisable that you save as much as you can to offer a lender as a lump sum settlement.
• Ask about a repayment plan: If the settled amount is too much for you to pay at once, then talk to your lender about paying off the settlement in affordable installments.
• Do not pay with post-dated checks: Once you’ve reached a settlement, pay by money order, wire, or debit card. If you pay with a post-dated check you could end up in court for check fraud.
• Make sure your lender reports your settlement as “paid”: Once the settlement procedure is over, make sure your lender reports your accounts to the Credit Bureau as “settled” or “paid”. Paid accounts will improve your credit score instantly.

2. Settling with a Settlement Company

If you are not quite sure of getting your loans settled effectively by yourself, there is nothing to worry about! A settlement company can help you take care of your payday loan problems.

When you enroll with a settlement company, the company negotiates a settlement on your behalf. Their debt negotiators evaluate your financial situation thoroughly then contact your payday loan lenders and start the negotiation process. This process is usually carried out under diligent supervision of a lawyer, to ensure the entire procedure is legal.

Victimized by payday loan settlement scam? Take action without delay

If you have fallen prey to some sort of payday loan settlement scam, immediately lodge a complaint with the BBB, the National Consumer Debt Council, the department that regulates payday lending in your state, and your state’s Attorney general.

It is also advisable that you consult a reputable consumer rights lawyer in your state.

How to evaluate the credibility of a payday loan settlement firm?

Before you put your faith in a payday loan settlement company, it is important to ensure that the firm can be trusted. Here’s how to do it:

• Check the service costs: The amount charged by the settlement company should not exceed 20% of the total amount to be settled. At the most they should charge you 35%. However, if the cost seems more than you can afford, try out other alternatives. There is no point in making your credit problems worse.
• See if the settlement company reports to the three major credit agencies: Always chose a settlement firm that report their client’s settled accounts to the 3 major credit reporting agencies. A settlement program does hurt your credit score for a time, but as the company starts reporting your accounts settled, it gets reflected on your credit history.
• Check the employees: Make sure the settlement company employs debt arbitrators who are certified by the International Association of Professional Debt Arbitrators (IAPDA). This certification ensures that the arbitrators have a sound knowledge of the laws governing the debt settlement industry and are capable of grasping your financial situation.
• Cross-check the company’s past record: Ensure the company has a history of success stories. Ask for case studies to cross-check the company’s past record if they are not available online. If the company is reluctant to provide you with any information, perhaps the company is not right for you.
• Look for consumer reviews: Look for reviews about the settlement company on the internet. Google the name of the company and click on ‘show options’. Then go to their discussion section and find on line discussions and updates regarding the company to help you get an idea of the company’s reputation.
• Ensure that the company is a member of the local Chamber of Commerce: If the company your are considering is a member of the local Chamber of Commerce, find out whether this chamber is an accredited member of the United States Chamber of Commerce as well. This affiliation is proof of the settlement company’s fair conduct.
• Look for Better Business Bureau (BBB) affiliation: Last but not least, ensure that the company you have chosen is affiliated with the BBB or some other reputable pro-consumer group.