Understanding Repayment Terms for Payday Loans

The first thing that you must understand about payday loans is that they are considered short-term loans. In other words, if you are looking to repay a personal loan over a matter of months or even years then a payday loan is not right for you.

A payday loan is generally taken out for emergency purposes, and is paid back within a short period of time. Most payday loans amount to no more than $100 to $1,000, thereby making them fairly easy to pay back within a short period of time.

Most payday loan companies require a quick repayment on payday loans, so it is important to understand what they expect regarding the repayment of your payday loan before you even fill out the application.

Repayment Terms and Repayment Schedules

Your payday loan may be paid back in one installment, or you may be able to set up a payback timetable for repayment. The payday lender will likely use your paycheck dates as due dates for your payday loan. For example, if you get paid every two weeks, your payday loan will likely have a repayment schedule of 14 days. If you are paid every month, your repayment terms may be more like 30 days. However, this depends on many factors, including the payday loan company, your pay dates and your monthly income.

Payday loan companies require the repayment of a payday loan in the agreed upon timeframe. If you are unable to repay your payday loan according to your contract, you may be faced with additional penalties, fees and interest charges, which many times can be quite steep.

The Process of Rolling Over Payday Loans

Although many payday lenders allow borrowers to “roll over” their loans, this process often comes with a hefty price tag, so carefully consider whether you want to go this route. Some states, however, have legislation that prohibits the payday lender from charging more than the state’s usury cap for payday loans. Usury laws dictate the maximum amount of interest that a payday lender can charge a borrower. If the fees charged by the lender exceed the state’s usury laws then the loan may be considered void; if this happens, you will likely only be responsible for the principal amount of your loan.

State and Federal Legislation

There are currently eight states that have legislation in place that requires payday lenders to offer an installment plan to borrowers if they reach the maximum amount of rollovers allowed by law. Many times, this happens when the borrower is simply unable to afford the repayment of the loan. Paying off a loan through repayment instead of rollover provides the consumer with a realistic way of paying off the loan.

If you find yourself in a situation where you are simply unable to pay off your payday loan, the best course of action is to contact the payday lender and set up repayment terms; this may include rolling over the loan or setting up a repayment schedule, depending on your needs and your loan’s terms and conditions.

The Rights of Payday Lenders

It is important to understand that payday lenders have rights when it comes to pursuing the money that is owed to them. This may include wage garnishments, levy and liens. It is because of this that it is in your best interest to make reasonable repayment terms with the payday lender if you find yourself unable to pay off the payday loan in the agreed upon amount of time.

It is also important to understand that repayment terms can vary widely from company to company and from state to state, so it is important to always fully understand all of the payday lender’s terms and conditions regarding their payday loans before signing a payday loan contract.

Payday loans can be a very convenient and practical way to secure short-term cash, and they are often a sensible alternative to bank overdraft and bounced check fees. However, they have important loan repayment terms that should always be considered when taking out a payday loan. It is therefore crucial that you educate yourself on your loan’s terms and conditions, which include repayment terms, before securing your next payday loan.

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