Payday loans are generally taken out at high rates of interest for relatively short periods of time, from a couple of days to several months. However, if a payday loan is not repaid on time, the company that issued the loan may take measures to collect on the unpaid debt. For borrowers who face a large amount of debt, negotiating a settlement to avoid the incurring of additional fees may be an option.
Payday Loans
Payday loans resemble other loans in that the borrower is obligated to pay back a certain amount of money, plus interest, by a certain period of time. Legally, a payday loan can be negotiated down. However, the payday loan company will have to agree to receive less money on the loan or to receive the money owed over a different time frame than originally agreed on. Companies are not legally required to negotiate this form of debt.
Default Penalties
Borrowers who fail to pay back payday loans on time are liable to face additional penalties. If the debt continues to remain unpaid, companies may add additional late fees or raise the interest applied to the loan until the person owes an amount several times the size of the original loan. Some payday loan companies may accept payment of only a portion of this debt, while others will demand it be paid in full.
Negotiation
While payday loan companies are not required to enter into negotiations with borrowers, some may choose to. Negotiations can result in the borrower having to pay the company less money -- a debt settlement -- or in paying the money over a longer period of time -- a debt payment plan. In some cases, the negotiation may result in harm to the borrower's credit rating, particularly if the debt is settled for only partial payment.
Considerations
Not all payday loan companies are willing to negotiate. Generally, a payday loan company will negotiate if it decides that it in within its financial interest to do so. In some cases, the company may believe that it can collect more money by pursuing forceful collection. In some cases, the company may opt to sell the debt to a collection agency, with whom the borrower will have to attempt to negotiate a settlement.
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