Understanding Repayment Terms
Payday loans are, by their nature, a type of short term loan. A short term loan will be suitable for you if you are looking for a personal loan which is to be paid back in full within a short period, rather than extending for months or years.
As a general rule, a short term loan is taken for a specific short period of time and used to cover emergency expenses. The size of a short term loan should make it possible to repay within a short time, because the loan amount generally is relatively small, ranging from $100 up to $1000.
Before you apply for a short term loan, double check with the short term loan company to see exactly what the time frame is for repaying your short term loan.
Short Term Loan Repayment Terms
When setting up the terms of your short term loan, the short term loan company will take into consideration the date when you will receive your paycheck from work. Generally that is when payment will be due on your short term loan, meaning that if you receive your paycheck once every two weeks, the repayment will be due within fourteen days.
If your payday is once a month, repayment will be within thirty days. However, this can vary according to the short term loan company you are dealing with and the amount of your monthly income. The lender might require the whole amount to be repaid at one time, or it may be divided into installments.
You must repay your short term loan according to the terms you signed on. Failure to do so can result in additional fees such as penalties and interest charges. These often amount to quite a sum.
Rolling Over a Short Term Loan
If you are unable to repay your short term loan according to the original terms, the lender may permit you to roll over the loan – for a steep price. There is a usury cap, though, in many states, which limits by law the amount a lender is allowed to charge for a short term loan.
The usury cap regulates the amount of interest that can be charged on a loan. Fees in excess of this amount can cause the loan to be treated as void. In such a case, you will probably have to pay only the principal on the loan.
Legislation Regarding Short Term Loan
By law, a maximum number of rollovers are permitted to short term loan borrowers who cannot afford to pay off the loan. Once this figure has been reached, state law which has been passed in eight states so far stipulates that short term loan companies must offer borrower the option to pay in installments. While paying in full may not be possible, an installment plan provides borrowers a more manageable way to gradually pay off their short term loan.
Contact your short term loan company if you see that you cannot afford to pay your loan in full. You will need to request special repayment terms – either a rollover or an installment plan. This will depend on the terms and condition of your loan, as well as your personal situation.
Loan contract
According to your loan contract, the short term loan company will quite possibly have the right to obtain payment by either garnishment of your wages or a levy or lien on your property. These are very serious actions.
To avoid this type of situation, if you cannot manage to pay the full amount of the loan within the contracted time, inform the lender immediately in order to work out alternate repayment terms.
Different policies regarding repayment terms
Each short term loan company and every state may have different policies regarding repayment terms. To protect yourself, make sure that you understand what is written in your specific contract about the loan terms and conditions before you sign.
The advantage of short term loans is that they can be very helpful and convenient when you need some extra cash for a short period. Securing a short term loan rather than risking charges for NSF checks or bank overdrafts may be a very wise course of action. Just make sure that you have a thorough understanding of the repayment terms involved.
Read carefully through all the details of the loan, including the terms for its repayment, before signing any short term loan contract.
