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More and more private borrowers and legal entities are using the microcredit services of banks and microfinance organizations. In the event that for some reason it is not possible to repay the debt of a payday loan and the matter is delayed, a tense situation arises with many questions. It is best to understand the consequences in advance and develop a plan of action.
With “competent” behavior, non-payment of the loan is not a disaster. On the contrary, it is often more profitable to forgo huge monthly payments and wait for the trial. During the trial, the amount owed will be fixed and no more interest will be charged, at least that’s what the info direct loan transfer said about it. The repayment schedule for this sum will have to be negotiated with the bailiffs who are almost always ready to compromise (if you prepare properly for this step).
Principles of operation of the payday loan
Payday loans are short term loans originally designed to promote people up to their payday. The money is credited directly to your bank account. You pay all of the interest and fees at the end of the month. If you don’t pay off your payday loan obligations, then you will have to collect debts.
However, you can increasingly take out payday loans for longer periods, usually three months (longer payday loans are available, however) and repay them in installments. What all of these payday loans have in common is that they are expensive and short term, and often small in size. Usually you have a payday loan to pay off your loan and interest. However, some payday lenders allow you to choose a repayment period.
A payday loan is expensive and can make your situation worse if you can’t afford to pay it off on time. You need to think carefully before choosing a payday loan. During the year, the average annual interest rate can go up to 1,500%, compared to 22.8% per year for a regular credit card. Payday loans are restricted by law in accordance with the rules set by the Office of Financial Conduct. The rules limit the amount of interest and default fees you can charge.
Someone who has taken out a payday loan for 30 days will not pay more than £ 24 in fees and charges per £ 100 borrowed. If you don’t pay on time, the maximum amount you receive in late fees is £ 15 plus interest on the amount you borrowed.
Before accepting a payday loan, many lenders will require you to establish a recurring payment before payday also known as a payday loan. Continuous Payment Authority or CPA. This allows them to collect the debt directly to their bank account via a debit card on the due day. It can be practical but it is risky at the same time. This may not leave you with enough money in your account to pay other bills like a mortgage, rent, or other big expenses like heat or food. However, this can lead to the overdraft limit being exceeded resulting in bank charges. If you think the CPA won’t give you enough control, ask the lender if there is another way you can do it. You can terminate the CPA at any time even if you still owe the debt. So you have to pay it back in some other way.
What If You Can’t Pay Your Payday Loan?
Consequences of non-payment of the loan
Financial obligations of payables have a number of consequences if they are not met. Among the main ones are:
- the deteriorating credit history. All data is entered into the appropriate database which is monitored by other organizations before starting cooperation with a citizen. Constant defaults on payday loans can cause lenders to stop cooperating with a potential borrower because the credit rating will be low;
- sale of receivables to debt collectors. The assignment contract is concluded with the consent of the debtor but most often it is directly indicated in the text of the personal loan contract. Collectors quite often use methods of psychological influence on the borrower. In some cases, they even overstep the legal line;
- go to court. The litigation itself does not have such serious consequences but it can increase the debtor’s expenses for the amount of legal services and the amount of state tax;
- compulsory collection. The enforcement procedure is the process of executing a judicial act. Debt collection is carried out by finding and selling the debtor’s funds and property. These are only superficial consequences. If you look deeper, they are more serious than they appear at first glance.
In what cases does the MFI go to court?
The question of whether an MFI can sue may be of interest to any borrower. In particular, it is relevant for those who allow delays in the payment of loans to paychecks.
What if the MFI takes legal action?
It would be better to never allow that to happen for a decent borrower who repays their loans on time. But at the same time, every borrower should know what is the best course of action to take in a lawsuit.
How long does it take for an organization to go to court?
Typically, an MFI will not immediately prosecute for a minor payment violation. Usually, if the payday loan is not paid on time, MFI employees will contact the debtor on the first day of delay.
Payday loan collectors go to court?
It all depends on the policy of the financial institution that lends you. If after one month from the first day of late payment the whole situation does not improve, the collection agencies take over. And it is only after the methods of the collectors have failed to work that the MFIs take the case to court.
Whose side is the law on?
You have to understand that MFIs are different. Small bad creditors themselves often resort to illegal methods in the form of illegal actions of the same collectors. In such cases, debtors may turn to the police and the court to resolve the situation in their favor. In general, the largest MFIs which already have a good reputation operate on a purely legal basis. Their lending activities are strictly controlled by the Central Bank. This means that in the event of legal action, the borrower is unlikely to find any irregularities on the part of the lender to justify theirs.