How to Settle Payday Loans for Less

Payday loans, like credit cards, can become a vicious and seemingly never-ending cycle of debt. Often, the staggering interest rates associated with these types of loans can make them impossible to repay, which leads to default. If you're struggling to make the payments on a payday loan, it is possible to negotiate a settlement which will allow you to pay a smaller portion of what's owed while eliminating the debt once and for all.

Instructions

1

Request a current copy of your credit report from each of the three main reporting bureaus, Equifax, Experian, and TransUnion. These can be obtained once per year for free through the annualcreditreport.com website. You may get one report every four months; it may be worth it to pay for two of the reports if you need to speed up trying to settle your payday loan for less.

2

Look over your credit reports carefully and compare the information that is contained on each of them. You need to determine whether your account is still with the original lender or if it's been sold or assigned to a collection agency. It is important that you not make any attempt to settle a debt until you've verified who is actually able to collect on it. Also, check the age of the accounts. If the account is old, there is a possibility that it is time-barred from collection actions due to age. Check the statute of limitations in your state if your debts are more than two years old.

3

Tally up your total debts, including interest and fees. Decide what percentage of the debt you're able to repay and what the maximum amount is you can pay. Decide if you are going to offer a lump sum or monthly payments and be prepared with multiple offers. Depending on the situation, the creditor may be willing to accept your first offer but if not, you need to have a counteroffer ready.

4

Contact your creditor in writing with the terms of your settlement proposal. You need to be very clear about what you are offering and how it will benefit the creditor to agree to your terms. If your account is still with the original creditor, you may find this process somewhat easier as collection agencies often will use strongarm tactics to try to scare you into paying as much money as possible. Remember to keep your tone polite but firm and do not allow yourself to be intimidated.

5

Once you're able to reach an agreement, then you need to request a written acknowledgement from your creditor stating that they have agreed to accept X amount as payment in full for the debt. You may also want to negotiate how the account will be reported to the credit bureaus, as settled or as paid in full. Include this in the agreement as well. Once you have written agreement, then send payment, either by money order or a certified check. Never give a collection agency or creditor direct access to your bank account if you have one.

6

Once the debt is paid, continue to monitor your credit reports to ensure that the account is being reported as an agreement and/or settlement. Keep a written record of everything that occurs between yourself and a debt collector. You don't want to be haunted by the debt later on and if they don't hold up their end of the bargain, you need to have proof.