What If Borrowers Close Their Bank Account to Block Lenders from Automatic Payment?
You may think of closing your bank account to stop the lender from taking money out of the account but be advised that the lender begins the collection action immediately when the loan is due. You gave the lender full permission to get money directly from your account. Closing the checking account will not stop the lender from trying to cash the check you wrote. You will only end up accumulating more and more overdraft fees from the bank every time the lender tries to withdraw money from your account without success.
Remember that the payday lender can still pass your case to debt collection agencies who’ll even charge you additional fees. The collection agency can even sue you in a civil court for failing to repay the payday loan. Closing your bank account to avoid paying off a loan you owe will not be a solution to your problem.
You may even find it difficult to close your account in one bank and opening another account at a different bank. Most banks will not allow you to open a new account in their establishment while you still owe money in another bank.But you have to close all of your account to block lenders from automatic payment.
What to Do When You Can’t Pay On Time
To avoid unnecessary problems with the debt collector, you can talk to the manager of the place where you got the payday loan in the first place and discuss another repayment plan. Explain to the manager your current situation, the reasons why you cannot pay everything you owe in a single installment, and ask to pay the loan in small installments within a few months.
If you foresee problems with the repayment of a payday loan, you can always approach the lender on or before the loan is due and notify them of your inability to pay the loan on time. Most lenders will give you an installment plan in which you can pay the loan amount in small installments over a given period of time. Make sure the installment plan is written down properly and signed by both of you. If the loan owed is $400 or less, the installment plan must give you at least 90 days to complete the payment. If more than $400, the installment plan must be for around 180 days. You cannot be charged an extra fee for entering into an installment plan with your lender.
Can A Borrower Cancel A Payday Loan?
It is possible to cancel or rescind a payday loan. However, this can only be done on or before closing of business on the next day after you took the loan. You can cancel the loan by simply paying the lender the full amount you received. The lender will then be required to destroy the postdated check you gave them or cancel any form of electronic withdrawal you had permitted.
The loan can only be cancelled from the exact place where you got it. You will not be charged any extra fee for cancelling the loan. If the lender tries to charge you anything when you have cancelled the loan before the deadline, you can consult DFI and report the issue immediately. More importantly, the loan documents should contain precise information about your right to cancel the loan. Avoid signing a document that does not cover this aspect when taking a payday loan. Alternatively, you can contact DFI for clarification.
A good number of borrowers often fall into an unfortunate debt trap by taking out new loans to repay old ones. While this may seem like a viable option when you cannot repay the current loan, it only ends up increasing your debt and exposing you to more serious consequences if you fail to pay the loan again. In fact, you should avoid taking a payday loan if you already have another debt as, most likely, you’ll be unable to repay the new loan too.