How to get out of payday loan debt in Colorado
Despite all the pros and cons, payday loans remain the most convenient option for people to meet immediate cash needs. Payday loans can cost you a lot more in the long run than you initially intended to borrow.
Payday loans can quickly become a trap for borrowers due to the high interest rates and fees. The bill comes due and they take out another business loan with even more fees because they can’t pay it. Many predatory lenders abandon customers through deception and mislead consumers by approving loans in states where payday loans are illegal.
Below are some of the key facts about Colorado payday loan laws so you can make an informed decision about payday loans. Also, I will discuss how to get out of payday loans living in Colorado.
5 Important Colorado Payday Loan Laws You Should Know
1. In Colorado, payday loans are legal at a lower cost.
2. The maximum amount that can be borrowed through Colorado payday loans is $500. One or more payday loans can be used to reach the $500 limit. Although payday loans in Colorado have no maximum terms, they do have a minimum term of six months.
3. Payday lenders can charge up to 20% of the loan amount in financing fees for amounts up to $300. For every $100 over the first $300 borrowed, lenders can charge up to $7.50 on top of the standard financing fee. The law allows lenders to charge an interest rate of 45% when a borrower rolls over a payday loan.
4. The law allows repayment schedules. However, the terms of these plans may differ between lenders as long as they are legal.
5. Collection of outstanding debt is restricted under Colorado payday loan laws. Lenders can charge up to $25 for “insufficient funds” penalties. Lenders can sue borrowers for unpaid payday loans for the total amount of the loan plus any legal fees. Borrowers cannot be sued unless they close their checking accounts before fully repaying the loan or debt.
Lenders are required to issue refunds for the prorated amount of the APR if borrowers repay payday loans in full before the repayment term ends at the APR.
5 ways to get a payday loan debt solution in Colorado
You need to pay off your debt as soon as possible because these loans come at higher interest rates that accumulate until you pay off the debt. Usually, you have to pay off the debt when you get your next paycheck, but lenders give you 30 days to pay it off.
It can seem impossible to get out of a payday loan when you have one. Fear not, there are ways to get the payday loan solution and get back on your feet. The sooner you can repay a payday loan, the better.
Here are some of the ways to escape the clutches of a payday lender:
1. Make full payment
It is advisable to pay off all of your loan installments. This is undoubtedly the best way to eliminate your debt. Most lenders prefer it too. With a well-planned budget, you can afford it. If you make your payments in full, you don’t have to worry about additional debt.
Some states do not allow you to get a new payday loan unless the previous one has been repaid. Once you’ve made the entire payment, you can focus on improving your financial health.
2. Choose an advanced payment plan
You can work out an Extended Payment Plan (EPP) with your payday lender. This allows you to pay off the loan in smaller installments over a longer period of time without incurring additional fees or interest.
Before you talk to your lender, examine your finances and determine the highest amount you can quickly pay on your loan each month. Before the last business day before your loan is due, make an appointment with your lender to discuss restructuring the loan.
If you need to sign a new loan agreement for your EPP, read the terms and conditions well before signing. This way you avoid unpleasant surprises down the line.
Keep in mind that not all payday lenders will participate in an EPP. However, it is always good to inquire about your lender’s flexibility if you cannot afford to pay off your loan within the stipulated time frame.
3. Consolidate your payday loans
Why should you consider a payday loan consolidation to pay down your predatory debt?
Usually, when there is a high interest rate, all of your monthly payments are used to pay the interest payments. The interest payments are the minimum monthly payments that you have to make. So when the minimum monthly payment is high, you are unaware that you will make more payments. Your principal balance stays intact and your payday loans stay the same. As a result, lowering the interest rate through negotiation will help you pay off your debt quickly.
You can also avoid debt collectors since the payday loan consolidation company deals with your creditors. This is how you can lower the interest rate on your payday loans to make the total payments on it. You can also make single monthly payments to pay online.
Various companies offer such services. However, not all of these companies are legitimate. Contact a reputable debt consolidation company to sign up for a consolidation program.
4. Pay off your debts
Debt settlement allows you to get out of your debt situation. It serves as a suggestion to your creditors that you cannot pay off your debt in full and therefore only want to pay off a portion of your total debt. Most lenders and financial institutions will refuse to enter into a settlement agreement with you and will argue about the lump sum you are offering. However, if you can reach a reasonable settlement agreement, see only the profit!
The first step is to approach your creditors and lenders yourself and ask them to reduce your total principal amount to a discounted lump sum. The second step is to find a reputable debt settlement company or debt law firm and hire them to handle the task. If you follow the second way, you increase your chances of success. Drafting a settlement agreement on your own is a difficult task.
5. Consider taking out an alternative payday loan
Consider getting an alternative payday loan (PAL) if you are in a credit union. The National Credit Union Administration allows federal credit unions to make loans between $200 and $1,000 available to members. When applying for a PAL, the credit union may only charge an application fee of up to $20 to cover the actual cost of processing the application. The borrower must have been a credit union member for at least one month.
Getting a PAL can be a great way to pay off a payday loan and get out of high interest rates. The term of these loans is usually between one and six months. The same borrower can receive up to three PALs in a six-month period.
Can you file for bankruptcy to get out of payday loan debt?
Bankruptcy should always be the last resort. Insolvency has numerous long-term consequences that damage your creditworthiness over the years. Because of this, it’s important to explore all other options before going down this route. If you have too many obligations and not enough money to pay them off, bankruptcy may be a possibility. Payday loans and your other debts can be cleared as part of a bankruptcy filing.
You should avoid going into debt again. Payday loans are dangerous. Strive to increase your income and avoid living paycheck to paycheck. Payday loans are never a long-term answer to your financial distress, but they can certainly harm your financial situation. In addition, many illegal payday lenders use your bank account details for theft and other illegal activities. I hope you agree that payday loans should be avoided at all costs. Manage your money better for a secure financial life.
Lyle Solomon has extensive legal experience as well as in-depth knowledge and experience of consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the McGeorge School of Law at the University of the Pacific in Sacramento, California in 1998 and currently serves as the principal attorney for the Oak View Law Group in California.