Monthly Archives: April 2010

Understanding your extended payment plans for payday loans

People who have availed of short-term loans more commonly known as cash advance loans should have no problem paying it off. They are given until their next payday to settle the loan amount, and this is typically a 2-week period. Unfortunately, there are those who find it very difficult to pay back what they owe due to unexpected circumstances and as a result, the money that they had set aside for their loan payment is already spent for something else.

When the borrower does not notify the lender about his inability to pay, the post-dated check he issued during the time he availed the loan will be automatically deposited when the loan matures. Now, with insufficient funds, the check becomes a “bad check” which means that the bank will not honor it and the borrower will, in turn, be charged a returned check fee.

To prevent this from happening, the borrower needs to inform the lender beforehand of his predicament. Depending on their policies, majority of cash advance lenders do offer extended payment options for people who have difficulty paying off their debts. The Extended Payment Plan (EPP) is, in fact, a requirement for some states in order to assist borrowers in ensuring that they will have more flexibility in paying off their loans. However, it is necessary to get in touch with the lender as soon as possible so that they can arrange a grace period for you or prepare a payment extension plan.

Based on the CSFA (Community Financial Services Association of America) guidelines, with the EPP, borrowers can pay off the loan in four equal payments each payday at no additional charge. To avail of this, you are required to contact the lender’s office and request for an EPP no later than the last day before your loan matures. Furthermore, borrowers can use this option no more than once every 12-months only.

Not invoking the EPP or other state-required loan repayment plans would result in dire consequences. You will be charged for issuing a bad check in addition to paying the loaned amount in full; the lender’s Collections department will attempt to collect the full amount and will contact you by phone and mail just so it will be settled.

So you see, not communicating with the lender to set up an extended payment plan could bring so much inconvenience to you. Not to mention, it would also hurt your credit score.