How to Manage Payday Loan Repayment on a Low Income

A payday loan can help you cover emergency medical bills or home and car repairs. It is a short-term loan which needs to be repaid at the end of the month or your next pay date. However, you may find yourself in a stressful financial situation if you do not repay your loan amount on time.

Here are some tips to manage your payday loan repayment when you are on a low income:

Understand Your Repayment Options

Before requesting for payday loans online, you must know when the loan repayment is due and whether you will be able to pay back the loan amount on time. Usually, payday loans have to be repaid in 2 to 4 weeks in a lump sum. Make sure to check your repayment options before requesting for a loan.

Don’t Borrow More Than You Can Repay

You should determine how much money you need for covering your emergency expenses and only borrow that amount. The more money you borrow; the more lending fees you have to pay. Also, you should not take out a payday loan that is higher than your monthly income, as repayment would be difficult. 

Get a Written APR

You should understand the APR and associated fees for the payday loans before signing a loan contract. Remember that an expensive loan usually has a higher APR.  

Make Sure Funds Are Available to Avoid Overdraft Fees

When your loan is due, your lender will deduct funds directly from your checking account rather than waiting for your paycheck. The payment will bounce back if you have no or insufficient cash left in your account and eventually you have to pay late fees.

If the available balance in your account goes below zero, your bank will charge a sum of money every day until you replenish the funds. Both overdraft and failing to pay on time can hurt your finances, so make sure to have enough funds to repay your loan amount. 

Request Your Lender to Reschedule Payment

It’s better to talk to your payday lender and explain why you cannot repay your payday loans on time. However, talk to your lender at least a day before your payday loan is due. Ask your lender for an extended payment plan which will provide you more time to repay your loan amount.

Even if rescheduling the payment involves fees, it is cheaper than late payment or overdraft penalties.  

Follow these tips and manage your online payday loans effectively and wisely!
 

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How Does a Charge-Off Impact Your Credit Report?

A creditor may list your account as a “charge-off” after you have missed payments for several months. A charge-off generally means the creditor has lost hope that you will pay back the amount you owed and document this loss as bad debt. Also, they will close your account and transfer it to a debt buyer or collection agency. You are still responsible for paying back the outstanding debts even though your account is charged-off and your creditor reports it as a loss. 

How Much Does a Charge-Off Affect Your Credit Score?

A charge-off can significantly damage your credit score. However, the percentage of damage is unpredictable, as it may vary depending on the credit reporting agencies. Generally, a single charge-off can drop 100 points from your credit score and can take 3 years or longer to recover from the damage. 

How Long Does a Charge-Off Stay on Your Credit Report?

A charge-off will stay on your credit report for up to seven years from the date of the last payment you missed. The seven-year period does not restart if the debt is sold to a debt buyer or collection agency. Settling the charged-off amount won’t remove the charge-off from your credit report. Instead, the status is changed from “charge-off” to “charge-off paid” and will remain on your report for seven years.

How Do You Remove a Charge-Off from Your Credit Report?

The effective way to remove a charge-off from your credit report is to contact your creditor and request them to remove it after you pay off the debts. Before you contact the creditor, determine the amount you can pay as soon as possible. There will be no problems if you can pay the full amount. Otherwise, you should ask if they are willing to arrange for payments. 

Remember that third-party collection agencies cannot remove charge-offs from your report. You must speak to the original creditor about removal. Get the agreement in writing if they agree to remove it from your report.  

How Do You Avoid Charge-Offs?

Consider these to avoid charge-offs:

• Avoid falling behind on payments. 
• Automate your finances or checking account to ensure you do not miss any payments. 
• Enter a hardship payment plan, which lets you make reduced monthly payments during financial trouble.

Contact your creditor immediately if you have any problems in paying your debts. They make payment arrangements to help you avoid a charge-off, especially if they believe that you won’t pay the debts otherwise. 
 

Also Read: What Bills to Pay First: The Ideal Priority List

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