Most payday loans come with an Annual Percentage Rate of more than 600 percent per annum. As unsecured loans, they probably have the highest rates of interest. Though payday loans are offered anywhere between $200 and $2500, there are times when the borrower is not able to pay up these loans on time due to some reason or the other. Though some lenders are happy to give extensions or negotiate for a due date, there are some who can penalize you with high fees for late payment or default. There are some who go to the extent of taking legal action against the defaulter.
It is true that you can be sued for non-payment of payday loans. The courts can permit garnishments to the tune of 40 percent of the debtor’s paycheck. Payday loan consolidation is the next thing life to do. Having said this, the chance of a person being sued for delay in payday loans is less, because the amount lent is so small that the lender will not like to waste time and money in pursuing a legal case for this matter.
The best part is that payday lenders are not allowed legally to attach primary residence, child support income or retirement income and the money can be recovered from the borrower only if he or she sells the house. However, payday loans do try their best to collect the outstanding money and outsource these jobs to credit collection agencies who adopt aggressive tactics to recover the money through calls and letters.
Borrowers who take payday loan repayment lightly need to know that these lending institutions have been set up to help people who are denied loans at a short notice from traditional lenders. Under such circumstances, payday lenders take on a greater risk and pass the benefit to the borrower, albeit a high APR. Since, payday lenders are like true friends who help you when you need money the most, even borrowers should have the sense of responsibility in paying them back. In any case, the payday loan industry has come under intense legal scrutiny and the government is applying pressure to see lenders check the financial position and the repayment ability of the person before giving them the loan.
In order to avoid being wrangled in possible legal problems, it is better to get a contractual agreement done about the repayment process and fees, so that you can avoid harassing calls and letters. The best thing you can do if you are not able to pay payday loan lenders is to sort the matter with them and tell them that you will be able to pay them in installments, otherwise consult your legal options. These kind of cases usually go to Small Claims Courts and if you are at fault, the judge may ask the lender to wait for sometime (a stipulated time is set) before which you have to arrange the money and pay with interest.