Reasons Why Lenders Work With Payday Loan Consolidation Companies
January 19, 2011 at 11:13 pm | Posted in Uncategorized | 7 CommentsTags: get out of payday loan debt, pay off payday loans, payday loan consolidation, payday loan harassment, payday loan help, payday loan settlement
If you are one of the millions of Americans drowning in payday loan debt, chances are you have probably already considered seeking help from a payday loan consolidation company. You have done all the work you had to do to gain the upper hand against your payday lenders: researched online for a good and reliable consolidation company, filled out all the paperwork, and finally, you are ready to get your finances back in control. Then suddenly, your payday lenders tell you something that stops you in your tracks. One simple statement that can make anyone in debt feel completely hopeless: We do NOT work with payday loan consolidation companies.
Is this true? If payday lenders do not work with consolidation companies, then why do they even exist? Here are the three main reasons why your payday lenders will eventually work with your consolidation company.
1. Before you enroll in a debt help program, the first thing that payday loan consolidation companies will advise you to do is to close the bank account that your lenders have access to. Although consolidation companies send legal documents to your payday lenders to revoke their authorization to automatically debit your bank account, it is necessary that you close your bank account to make sure that there are no unauthorized charges coming out of your account.
2. Your payday loan consolidation company will also send legal documents to your payday lenders to cease and desist further communications with you. According to the Federal Trade Commission, payday lenders have to follow certain rules and regulations when collecting debt. If your payday lenders do not follow these rules and continue to make harassing phone calls, your payday lenders can be fined $1,000 per EACH phone call that they make. Because most payday loans are small amounts (between $200-$1,000), calling you becomes a risk that is just not worth taking.
3. Many are afraid that they will get sued if they do not pay off payday loans. Majority of borrowers do not know that most payday lenders (especially Internet-based) are not licensed to lend money to people residing in the United States. This means payday lenders do not have the ability to take non-paying customers to small claims court for a payday loan. Payday lenders often use this tactic to scare borrowers into paying them, and is effective because most customers are not well-informed about what lenders can and cannot do.
Now, sit back and think of this for a moment: Your payday lenders cannot debit your bank account for payment, cannot call you to ask for money, and cannot sue you for the unpaid loan. How else will they get paid? Who else can they turn to? There is only one answer: payday loan consolidation companies.
So why would your payday lenders deny working with consolidation companies in the first place? It’s simple. People who sign up with consolidation companies obviously have several payday loans. As a matter of fact, people drowning in payday loans usually have between two to twenty payday loans. Usually, consolidation companies work from one lender to another, which means that if you are a payday lender, you would be unsure as to when you would get paid. Payday lenders are aware of this and know that chances are, they could get paid faster if there is no third-party involved. For this reason, they claim that they do not work with payday loan consolidation companies, even though they eventually will.
Do not let your payday lenders intimidate you until you know all the facts. If you have tried everything you could to get out of payday loan debt yourself but have failed, maybe it is time to seek professional assistance. After all, who wouldn’t benefit from a little help once in a while?
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My question is should you attempt to “work” with the pdl lenders yourself before getting involved with a program? and how do you know who to chose to help you. Some, I feel want to much money as their fee and others scare me because they want to little…
Comment by Ellen— April 25, 2013 #
Hi Ellen,
There is nothing wrong with trying to pay off your own debt and doing so means that you do not have to pay for a consolidation company’s services. However, payday loan consolidation companies are professionals at negotiating down on payday loan balances so it is possible that you could save more money because they might be able to settle your debt for a lower price than you’d be able to. Usually, the money that payday loan consolidation companies can save you is more than the fees they charge so you could still save more money if you sign up for a consolidation program.
You can always find reviews online about payday loan consolidation companies. Just research the name of the company and customer reviews will show up and tell you more about their experience with the company.
The most important thing you should ask a payday loan consolidation company before you choose one is how they pay your payday lenders off. Stay away from consolidation companies who do not pay your lenders off right away. Often, some companies keep your money in an escrow account for 3-4 months before they start making payments to your lenders. This is not a good practice because within those first few months are when payday lenders tend to call you endlessly about your unpaid debt. When choosing a company, always ask them if they will be paying your lenders off right away or not and pick a company who will not hold your money in an escrow account.
When choosing a company based on fees, 20%-30% of your total amount of debt is acceptable. For enrollment fees, it should only range between $100-$200.
Comment by debtpay1— April 25, 2013 #
Most are asking for 40% of my total amount of debt, and I felt that was high and I guess since you are suggesting 20%-30%, then I am correct. One program’s fee was more in that range, of 20-30, so your information has helped me…and that company is only 7 payments, where the other was on a 12 month plan…My fear, as you said for dealing with them directly, is that they won’t negotiate with me in the same way that they will with a company. I do appreciate the info…
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