When a person takes out a payday loan -- a loan that charges him a high rate of interest and is meant to be paid back in a short time -- he will be given specific conditions for repayment. Generally, he must pay back the loan within several days to a month. If he defaults, then he likely will be hit with punitive rates of interest and fees.
Payday Loans
Payday loans command extraordinarily high rates of interest, up to 400 percent in a single year. Yet, for people who do not have access to short-term credit, they can present a means of bridging a cap in income. The two time limits that exist on these loans are the time limit on repayment and the time limit on the collection of the debt if it is not repaid.
Repayment
When a person takes out a payday loan, the lender will tell her exactly when the loan is due. More often than not, the lender will require that she offer a form of payment up front, either a postdated check or a checking account number. If she doesn't pay by the date on which payment is required, money will be take out from her account by the lender.
Debt Collection
If a person misses the deadline for repayment, he can expect to be forced to pay additional fees on the loan. These fees may be for missing the deadline to pay or, if his account was drawn on but did not have enough money in it, for causing a check to bounce or a transaction to not go through. Under some payday loan schemes, these fees will be reapplied each month and snowball in size.
Statute of Limitations
If a debt collector comes after the debtor for payment of the debt, then she will have a certain time within which she can file suit for collection of the debt. Technically, the debt collector can pursue collection of the debt forever. However, the debtor will not have many means of getting paid without suing first. Each state has its own statute of limitations on filing lawsuits for debt.
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