How to get out of payday loan debt in Colorado
Despite all the pros and cons, payday loans are still the most convenient option for meeting immediate cash needs. Payday loans can cost you a lot more in the long run than you originally planned to borrow.
Payday loans can quickly become a trap for borrowers due to their high interest rates and fees. The bill is coming due and they take out another business loan with even more fees because they can’t pay it. Many predatory lenders abandon their customers using deception and trick consumers into approving loans in states where payday loans are illegal.
Below are some of the key facts about Colorado payday loan laws to help you make an informed decision about payday loans. Also, I will discuss how to get out of living payday loans in Colorado.
5 Important Colorado Payday Loan Laws You Should Know
1. In Colorado, the payday loan is legal at a lower cost.
2. The maximum amount that can be borrowed through payday loans in Colorado is $500. One or more payday loans can be used to meet the $500 limit. Although payday loans in Colorado do not have a maximum term, they have a minimum term of six months.
3. Payday lenders can charge up to 20% of the loan amount in finance fees for amounts up to $300. For every $100 above the first $300 borrowed, lenders can charge up to $7.50 in addition to standard financing fees. The law allows lenders to charge a 45% interest rate if a borrower renews a payday loan.
4. The law allows repayment plans. However, the terms of these plans may differ between lenders as long as they are legal.
5. Collection of unpaid debts is restricted under Colorado payday loan laws. For “insufficient funds” penalties, lenders can charge up to $25. Lenders can sue borrowers for unpaid payday loans for the full amount of the loan plus attorney’s fees. Borrowers can only be sued if they have closed their current accounts before repaying the loan or debt in full.
Lenders are required to issue refunds for the prorated amount of APR when borrowers repay payday loans in full before the end of the APR loan term.
5 Ways to Get a Payday Loan Solution in Colorado
You need to pay off your debts as soon as possible because these loans come with higher interest rates that accrue until you pay off the debts. Usually, you have to pay the debt when you get your next paycheck, but lenders allow you 30-day payment extensions.
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 pay off 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 repay your entire loan. This is undoubtedly the best way to eliminate your debt. Most lenders also prefer it. With the help of a well-planned budget, you can afford it. When you make your payments in full, you don’t have to worry about incurring additional debt.
Some states won’t allow you to get a new payday loan unless the previous one has been paid off. Once you have made the full payment, you can make sure to improve your financial health.
2. Opt for an extended payment plan
You can work out an Extended Payment Plan (EPP) with your payday lender. This will allow you to repay the loan in smaller installments over a longer period without incurring additional fees or interest.
Review your finances and determine the largest amount you can quickly pay for your loan each month before speaking with your lender. Make an appointment with your lender to discuss your loan restructuring before the last business day before your loan is due.
If you need to sign a new loan contract for your PEP, study the terms carefully before signing. This way you will avoid unpleasant surprises along the way.
Remember that not all payday lenders will participate in a PEP. However, it’s always good to find out about your lender’s flexibility if you can’t afford to repay your loan on time.
3. Consolidate your payday loans
Why should you consider a payday loan consolidation to pay off your predatory debts?
Usually, when there is a high interest rate, all of your monthly payments go towards paying the interest rate payments. Interest payments are the minimum monthly payments you must make. So, if the minimum monthly payment is high, you are not aware of making further payments. Your principal remains intact and your payday loans remain the same. Therefore, lowering the interest rate through negotiations will help you pay off your debts quickly.
You can also avoid collection agents because the payday loan consolidation company will deal with your creditors. Thus, you can lower the interest rate on your payday loans to make full repayments on them; you can also make one-time monthly payments to pay online.
Various companies offer such services. However, not all of these companies are legit. Contact a reputable debt consolidation company to enroll in a consolidation program.
4. Settle your debts
Debt settlement allows you to get out of your debt situation. It will serve as a proposition to your creditors that you are unable to repay your debts in full and therefore only wish to repay part of your total debt. Most lenders and financial institutions will refuse to enter into a settlement agreement with you and will discuss the lump sum you will offer. However, if you reach a reasonable settlement agreement, all you will see is profit!
The first step is to approach your creditors and lenders on your own and ask them to reduce your overall principal amount to a discounted lump sum. The second step is to locate a reputable debt settlement company or law firm and hire them to complete the task. Following the second path will increase your chances of success. Working out 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 belong to a credit union. The National Credit Union Administration allows federal credit unions to provide members with loans ranging from $200 to $1,000. When applying for PAL, the credit union may only charge an application fee of up to $20 to cover the actual costs of processing the application. The borrower must have been a member of a caisse 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 usually ranges from one to six months. For six months, the same borrower can receive up to three PAL.
Can you file for bankruptcy to get out of payday loan debt?
Bankruptcy should always be a choice of last resort. Filing for bankruptcy has many long-term consequences that will hurt your credit for years. This is why it is essential to evaluate all other possibilities before embarking on this path. If you have too many obligations and not enough money to pay them off, bankruptcy may be possible. Payday loans and your other debts could be erased in a bankruptcy filing.
You should avoid going into debt again. Payday loans are dangerous. Make an effort to increase your income and avoid living paycheck to paycheck. Payday loans are never a long-term answer to your financial needs, but they can definitely hurt your financial situation. Also, many illegal payday lenders use your bank account details for theft and other illegal actions. I hope you will 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 consumer credit and drafting knowledge and experience. 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 works for the Oak View Law Group in California in as lead counsel.