Payday loan debt consolidation is a legitimate debt relief option in most states. However, some companies play with the rules and twist them for their own financial benefits. So you have to be careful and stay away from them. Here are a few ways to identify a legitimate payday loan consolidation company in your area:

The company does not charge an upfront fee

The company follows all the FTC rules and regulations

The company explains the program clearly

The company contacts lenders on your behalf

Payday loan laws are subject to state rules and regulations. Payday loans are banned in 13 states in the country. Some states allow only low-cost payday loans like Maine and Oregon. Around 32 states allow high-cost payday loans. Before taking out a payday loan, check out the state laws. Find out if it’s legal in your state.

This is one of the frequently asked questions in payday loan forums. The honest answer is that you won’t go to jail for not paying off your payday loans. Lenders may file a lawsuit in a civil court for collecting debts. But they can’t file a criminal lawsuit against you.

Payday loans are short-term loans. The amount is also small. Most lenders don’t want to get into legal hassles for collecting debts. They send several reminders so that borrowers are able to clear their dues. They extend the repayment term, impose additional interest, and withdraw money from the borrowers’ checking accounts till the ACH authorization is revoked.

Consolidation companies charge a fee for their professional services. The fee structure varies from company to company. So it’s better to compare the fees charged by consolidation companies and then enroll in a program. Don’t enroll in the program if a company asks you to pay an upfront fee because that is against the federal law.

If the fee is a major concern for you, then you can look for a non-profit debt consolidation company. They charge a nominal fee for bringing your loans into a budget-friendly repayment plan.

There are a few ways to get help when lenders refuse to cooperate with you:

• You can seek advice from a credit counseling agency about your next financial move.
• You can request the bank to revoke the ACH authorization so that lenders can’t debit money automatically.
• You can consolidate or settle cash advance.

You can apply for community assistance plans for help with utilities, house rent, and food.

Payday loan debt settlement is a viable option for you. It helps you to settle your high-interest debts with a lump sum payment and save money. In this program, the settlement company negotiates with your lenders after conducting a thorough evaluation of the state laws. They help to scrap down a large amount of debt by using their smart negotiation skills.

Some states have banned payday loans. Some states have capped the interest rate. If your lender has broken the law, then it will be easier for the settlement companies to settle the account.

Bankruptcy is another option. It does help with payday loan debt. But it does come with lots of complicated rules and formalities. You break one law, your case will be dismissed. For instance, if you have borrowed cash advance 2 months before filing bankruptcy, then it will be presumed fraudulent. The onus is on you to prove that you didn’t have any fraudulent intention. If you can’t prove, then your case will be dismissed.

Legitimate payday loan consolidation companies know the state and federal laws very well. When a lender breaks the state or federal laws, the consolidation company can catch him instantly and negotiate accordingly to reduce your monthly payments. See also – How to get out of illegal payday loans – 5 Easy steps for you

With the rise of loan defaults in the country, it has become a major concern for many borrowers. What happens when someone fails to pay back the lender? Typically, borrowers have to face these consequences when they default on their loans.

Bank overdraft fees: Lenders don’t wait when you owe money to them. They will instantly initiate automatic withdrawals from your checking account if you have given them access to it. If they can’t debit your checking account, then they can try to collect whatever money is there in it. This can drain your checking account and cause other bank transactions to bounce, which triggers a bank fee against you.

Frequent collection calls: When you default on your loans, lenders will start calling you after some time. They will send you letters or threaten to take legal action against you. Some lenders may also call your friends and relatives for money. As per the federal law, that is illegal.

Lawsuits: If you assume lenders won’t sue you for a small amount, you’re mistaken. According to Michael Bovee, the owner of a debt settlement company, most lawsuits filed against consumers are for small amounts. Lenders often win the lawsuits simply because consumers don’t appear in the court. The courts issue a summary judgment and collect money from the consumer on behalf of the lender.

Depending on the state laws, liens can be imposed on properties, bank accounts can be levied and wages can be garnished.

Lenders don’t check your credit score before approving your loan application. So you don’t need a good credit score to qualify for the cash advance. Rather, lenders are likely to do an income verification before giving you fast cash. So if your income is too low, then you might be in trouble.

Lenders can garnish your wage if the loans go unpaid. They can file a lawsuit against you and your non-appearance in the court may help the lender to win the case. This can lead to summary judgments and wage garnishments later. Know more…