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What to Do If You Can't Pay Your Payday Loan

Here's how to get yourself out of debt.

Here's how to get yourself out of debt.

This article will help you find relief from payday loans and escape the trap of taking out yet another loan. First, know that you’re not alone. According to a survey taken by the Pew Charitable Trusts, over 12 million people use payday loans annually, borrowing a total of $7 billion! While that might be good for lenders, it’s not so good for borrowers, who find themselves unable to pay back their loans because of the high-interest rates.

If that describes you, read on in order to find out how to escape from the cycle of Payday lending.

How Payday Loans Work

Most payday loans work by having the borrower write a post-dated personal check payable to the lender for the amount borrowed plus any fees. So, if you want to borrow $100, you’d write the lender a check for $115. The lender would hold onto that money until the loan is due (usually the borrower’s next payday).

Once the loan comes due, the lender either cashes the check, or the borrower pays an additional fee to “roll over” the loan for an additional 14 days. So, if you roll over the loan three times, you’d be paying $45 to borrow $100!

Payday loans are eating up your money

Payday loans are eating up your money

Payday Loans: Eating Up Your Money

Everyone needs extra money at on time or another, which is how good people end up with payday loans. You may just need money for food, or for emergency car repairs or medical bills. Some people will even get a payday loan to pay off other payday loans.

Whether you have four or five ongoing payday loans or just one, read on to find out what to do if you don’t have enough money to pay off the principal but are overwhelmed by the interest payments.

Option 1: Stop Payment on Post-Dated Checks

Do this before you have to make another interest payment. It will cost you to stop the payment, but it's worth it. Even if it goes in as a debit to your bank the bank will still stop it as long as you have the correct amount the check was written for and the name of the payee (be sure to give every single name the company uses).

After you stop payment, go to the payday loan and tell them you have stopped payment on the check. They will likely try to cash it anyway. Once they fail to collect on the check, though, the loan company will contact you to set up a payment plan. Often times they will even drop down your balance if you can pay the reduced balance right away.

Don't let them set up high weekly payments that you can’t afford. Instead, only agree to payments that you know you can make, even if it’s only $10 or $25 per week. In most cases, they will stop charging you interest. You can often negotiate a lower balance and if you can pay it off at that time then you should try to do that. They will often lower your balance even when you're making payments.

If you continue to fall behind on payments or stop payments altogether, they can take you to court or turn you over to a collection agency. However, they rarely if ever turn it over to collections.

You may be surprised that stopping payment on the check is even an option, but as Clark Howard says, "There’s no such thing as debtors prison." Moreover, most states bad-check laws do not usually include post-dated checks because at the time you wrote the post-dated check you had no money to cover it and the lender knew it. Check with your own state to make sure, however.

How to stop harassment from creditors.

How to stop harassment from creditors.

Option 2: Send a Stop-Calling Letter

Some Payday Loan operators call and harass you in order to collect on their loan. If they do so, send them the letter below. Once you have set up your payment schedule, there is no reason to talk to them again and no reason for them to call. If they contact your work send a letter telling them not to contact your work. Send both letters certified mail so you have proof of receipt. You can also file a complaint with FTC if they continue to call you after receiving your letter.

Remember the person on the other end of the line is likely getting paid minimum wage and may have their own loans. They're just like you and me. They are not as important as they think they are. You do not have to suffer harassment from them.

These calls can get very out of hand, you need relief from them. This letter will not stop you from calling your loan holders and making arrangements or negotiating a different arrangement.

Sample Stop-Calling Letter


Street Address

City, State Zip

Re: Account No. ####-####

Dear Sir or Madam:

I am writing to request that you stop all contact with me by phone or mail regarding the above account as required by the Fair Debt Collection Practice Act, 15 USC sec. 1692 c (c).


Your name and address

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Read More From Toughnickel

Avoid falling into the payday loan trap

Avoid falling into the payday loan trap

Other Steps to Take on Payday Loans

Don’t Avoid Your Creditors

When you’re behind on a loan, the last thing you want is to tell the person you owe the money to that you can’t pay them back. It’s much easier to ignore him or her and hope the debt will magically disappear. Instead, you should get in touch as soon as possible if you’re having trouble, ask for more time. If they think you’re acting in good faith, most lenders will work with you by offering an extension or even reducing the principal.

Get Credit Counseling

There are non-profit groups in every state that offer free or low-cost credit counseling to consumers. However, be sure to avoid any group that wants a large upfront payment in exchange for negotiating your debt down—you can do that on your own with the advice that I’ve given you. For reputable credit counseling, you can check with your employer, bank, or housing authority. A good place to begin your search for a reputable agency is the National Foundation for Credit Counseling.

Stop Wage Garnishment

If you agreed to a “voluntary wage assignment” clause in your initial agreement, write a letter revoking that agreement. That will prevent the lender from taking your wages without a court order.

Talk to the Regulators

Even if payday lending is legal in your state, talk to the agency that regulates them. You can file a complaint or simply ask for assistance. Some of the creditor’s practices may be illegal and regulatory agencies can also step in to help you work out a payment arrangement.

Alternatives to payday lending.

Alternatives to payday lending.

Don't lose hope because you're in debt. Do your best start over and get you loans paid off. Getting rid of payday loans is your biggest step to a debt-free life.

Please get yourself out of debt and live a much happier life.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.


Blackberry (author) on November 09, 2012:

blu, Please write the stop calling letter you see in this hub. You can also send them a letter telling them not to call at work. If you would do the loans the way I explained I think it would be better than letting your checks bounce to them. It will cost you at the bank but it is worth it. Remember the guys calling you are just a bunch of low level employees and very likely make less money than you. Once you send that letter you can than complain to Fair Trade Commission if they call. You can also hang up on them. Better yet block their calls. Good luck. Sorry it took me so long to get back here.

Blackberry (author) on November 09, 2012:

cateyes, If I were you I would be sure to include the payday loans on your bankruptcy. Good luck

blu on September 24, 2012:

I too owe about 5 different payday loans. I am in over my head one thing after another happened including my car breaking down now I owe all these loans and one in the past that also claimed they were going to send me to the Attorney General's office. I have been paying on these current loans but can not longer pay. I am desperate and cant sleep at night just worying about losing my job over this. I am so afraid they will call my bose or school dist office to complian. I am walking around like zombie at work from not sleeping at night trying to figure somethint out. I have tried getting a second job but it is so hard nobody hiring. Please any adivise would help. thanks

cateyes on August 25, 2012:

I am claiming bankruptcy at this time I got a call to day saying they are going to arrest me Monday if I don't pay now and my bankruptcy doesn't include a payday loan .

Blackberry (author) on August 09, 2012:

jamie, I don't know if they can. I have heard courts don't like them and I think it is also according to what state you live in. Check around on the internet and see what you can find for your state. Thanks for stopping by.

Blackberry (author) on August 09, 2012:

monicamelendez, They are worse than credit card companies I think. Thank you for stopping by and leaving a comment.

jamie on July 17, 2012:

i had a payday loan over 5 years ago knw there saying they are going to take me to court can they do that

monicamelendez from Salt Lake City on July 14, 2012:

I would say that these loans places are WAY worse than credit card companies. The amount of interest you get charged is seriously insane. People agree to it unfortunately but they usually don't really understand what they're getting themselves into. For most people, they would be way better off using credit cards. Of course, the best situation is to stay out of debt entirely.

Blackberry (author) on July 14, 2012:

dmop, You're right they want you to get in as deep as you can. Thank you for your comment.

dmop from Cambridge City, IN on June 21, 2012:

These loan places are similar to Credit Card companies they want people to be indebted to them long term and love it when people borrow more to pay what they owe. Good article, voted up and useful.

Blackberry (author) on June 11, 2012:

Rusti Mccollum, You have some very good ideas. Sorry to hear about your truck. The thing with the bank. People have to get to the bank and STOP PAYMENT ON THE CHECKS, once you do that. No matter how often they try to cash your check the bank won't charge you as long as there is a stop payment on check.

As for the letter you send it should be as is just to stop them from calling. Once that letter is sent and they receive it they can’t call you anywhere not your job or your home. If you want to make payment arrangements in another letter than that's what I would do. I would not promise them anything for sure. Just let them know you will be there every month to make a payment. Any calls that are made are made by you not them. You have to be the boss in this or they will walk all over you. I would make sure I got the loan paid off little by little if you have to. Thanks so much for stopping by and leaving a comment I appreciate it.

Ruth McCollum from Lake Oswego, Oregon on June 10, 2012:

Pay day loans were so out of hand in Oregon, they created laws making them much stricter for them to charge such high interest. Title loans were outrageous as well. When Oregon put that law into effect it effectively put them out of business here and they are no longer on every corner. There's just a handful now. This author is 100% correct STOP PAYMENT. They will keep running them over and over again if you don't. Then the bank can charge their fees for insufficent funds in the range of 20.00 to 35.00 depending on your bank EVERY time they run the same check through. Title loans are not good.Most people that take them lose their paid off cars for a few hundred dollars,when you have so much more invested in the auto/truck.

Sending them a certified letter is a wonderful way to put them on notice and as the author stated,they are loans and need to be paid back (sometimes if they take your car,the loan is considered paid. It's a good idea to incorperate in your certified letter to state they may not call your job., or your house constantly . Then you can by law sue them for harassment, and job endagerment due to collection calls. Once you have put a creditor on notice in writing that they may NEVER call your job, then you can threaten them which usually stops the calling. You can put in your letter they may only call once a month,(you have to speak to them at least once a month. Call them if your monthly payment arrangement cannot be made on time.

If you have to make arragements and for instance you say I can pay 50.00 a month.Chances are they will say that's not enough.They will try to work a higher payment you cannot afford. Also it's a good idea to also put what you can manage a month to give them in your certified letters. Keep copies of all bank statements verifying you are making an honest effort to pay them. If they accept a payment from you after the letter ,then you have made a payment in the amount they accepted again showing honest effort to pay. These companies do not care if their 300% a month interest means you can't pay your rent. I know the people in our state fought to have a law passed they can't charge such high interest rate. We petitioned against them and our laws are so tight now, you only see a few in the city now. Not on every corner as it used to be. If you've made a payment or more for the amount you stated you could pay,DO NOT LET THEM LIE AND BULLY YOU.They take advantage of good honest hard working people.You are trying to pay them and you have rights. They are for the company to make money. They have eaten peoples entire paychecks. So many Oregonians filed bankruptcy, it became clear something had to be done. This is what I've read and truthfully we lost a truck we had paid off for a few hundred bucks.We both were working ,thought we could pay it off,before we knew it we had so many loans out we were drowning.NONE of them gave us enough to pay off the truck loan. In our case that considered our loan paid.Still we lost a great paid for truck. We learned a lot from it though and if you can avoid short term loans at all costs! Sorry this is so very long, I was trying to help others as the author who wrote such a great hub, this is the longest comment I ever made! Thankyou for bringing this to peoples attention.You may have saved some poor guy/girl from the payday loan pit. Some of our loans left us owing up to 3,000.00 to our bank,from their repeated attempts to write those checks! We had to both take on another job on top of the ones we had to pay them off.Missed time with our kids,etc. thankyou for bearing with me.I thought this was a wonderful subject! well written and full of perfect advice!Thankyou!

Ruth McCollum from Lake Oswego, Oregon on June 10, 2012:

Pay day loans are dangerous. Sooner or later you have to take out another one just to pay the prior.Then, it's all the way down hill from there. I know this because ,my husband and I got in way to deep with these short term "payday advances". In oregon ,where I reside they have made it a lot tougher on the short term payday advance or title loans.They now cannot charge huge interest rates.They prey upon the working class, taking advantage of them. This resulted in most of them shutting down here. Title loans were affected as well.I say good riddance!

Blackberry (author) on January 20, 2009:

muley84,Thanks for visiting my hub.

Michael A Muehleisen from Miami,FL on January 16, 2009:

vey interesting and informative. well written also.

Blackberry (author) on December 02, 2008:

Thanks for comments and visiting my hub.

Ken Devonald from Edinburgh on December 02, 2008:

An interesting hub Blackberry! I agree that high interest loans are incredibly damaging to the quality of life, and when you have these problems it is difficult to know how to cope!

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