Took a loan from illegal lender. How do I go about paying them only principal amount.

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If you've allowed them to deduct money directly from your bank, close your account with the bank asap. Go to the bank and approach the manager. Explain why you're revoking the ACH authorizations. Open a separate new account and transfer all your cash into that one.

Now send a letter/mail to the lender informing him that you have revoked the ACH and stating that since they're not licensed to lend in your state, you're not under any legal obligation to pay them. As for the collection attempts, you can ask them to cease and desist.

Ask for a valid address, so that you can send them money orders.

If you have already paid them more than the principal amount, you can even ask for a refund, along with a paid-in-full receipt/letter.

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