No Partial Payment
If you have an outstanding balance on your credit card, paying off half the principle will reduce monthly interest fees significantly.
If you have an outstanding payday loan, on the other hand, it is all or nothing.
Payday lenders do not accept partial payment.
Although this might not seem like much, no partial payment is a dangerous pitfall of payday loans…
Many payday loan transactions are based on personal checks.
Borrowers write a personal check to the lender for amount borrowed plus fees and receive cash. Lenders hold the check. At the next payday, borrowers can:
- pay only the finance charge to extend the loan (principle remains the same)
- pay the full amount in cash to redeem the check (the key words here are full amount)
- allow lender to deposit check at bank (identical to previous option - you will need to have the full amount plus interest in your bank account)
If you extend (or ‘flip’ the loan), you will be charged interest on every extension. In effect, your interest fees will double if you flip it once, triple if you flip it twice, and so on.
This is not a good place for you to be. It is a shortcut to the debt treadmill.
From a payday loan company’s perspective, however, this is exactly where they want you. Every time you flip the loan, you increase the lender’s profit substantially (at your expense).
That is why payday lenders will not accept partial payment. They have no incentive to do so - it would only reduce their profits. Most money is made when borrowers flip their loans. (It is also why unethical payday lenders will give loans to people they know will be unable to pay the full amount on their next paycheck.)
Whenever possible, consider payday loan alternatives that accept partial payments on the principle to reduce your interest fees.
If you must use a payday lender:
- borrow only the minimum amount necessary and no more
- have a concrete plan to repay the loan in full on your next paycheck
- have a survival plan for the month after
Recent Posts:
- 05/05/2009: CompareCashLoans.com Gets a Facelift
- 06/16/2008: Demographic Study of Online Payday Loan Consumers
- 05/26/2008: Daniel O’Sullivan
- 04/24/2008: Update: Payday Loan Laws that Hurt Consumers
- 04/07/2008: Manitoba Public Utilities Board
Random Posts:
- 09/02/2006: Lieutenant Colonel Mark Ballasteros
- 08/10/2006: Keith Goosby
- 04/07/2008: Manitoba Public Utilities Board
- 11/23/2006: Hank Klein
- 10/06/2006: Bruce Cran