A pay day loan is a short term loan that usually covers your emergency expenses before you get the pay check. It is very useful as it helps you handle unexpected expenses that may come before your pay check. You get these loans instantly and have to repay them when you receive your next pay check. If you have a default payday loan, then large fees will continue to build up and send you further into debt.
Some tips to avoid default on payday loans are as follows.
1. Contact your lender as soon as possible: If you are unable to pay the loan on time call your payday loan lenders and talk to them about your situation. Usually lenders have policies related to avoiding default on payday loans and will be willing to help you. Ask for an extension of your repayment period. This is better than defaulting, as a default payday loan may affect your credit rating very badly.
2. Workout a repayment plan with your lender: In case you can not borrow funds to pay off payday loans, try to make a payment every month to reduce the balance. This may be very difficult as the rate of interest is so high that you hardly pay anything towards the loan while paying monthly installments. If you find that you are paying only towards the interest every month then negotiate with your lender. Try to work out a repayment plan with him that you can afford to pay.
3. Pay extension fee to extend your loan term: If your lenders are not willing to negotiate with you, then you can pay fees to extend your loan till your next payday. Not more than two extensions are permitted. Thus, you get saved from defaulting and can pay at a later date.
4. Convert payday loans to conventional loans: try to borrow the amount required from a conventional lender or from a family member. This allows you to repay the loan with a proper time frame and a proper interest rate.
These are the few things you can do to avoid default on payday loans. You must try to pay off these loans as soon as possible. This is because they have very high rates of interest. They can also, hurt your credit very badly.