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How to Negotiate and Get out of Payday Loan Debt

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Many people who opt for a payday loan in time of an emergency find it really difficult to payback the loan due to its very high interest rate or non availability of cash. Well there is nothing wrong in knowing that you don’t have the ability to payback the loan as per the agreed terms.

Nobody can foresee the future. When you signed up and agreed to the terms you had no idea you wont be able to payback the loan – and that’s perfectly acceptable. Lenders too know that – and at least the lenders with whom we choose to work with know this and are willing to change the terms if any of their customers are finding it difficult to payback their loans.

But we believe that most honest lenders who are in this business for the long term do understand that sometimes their customers may have difficulties in paying back the loan. So whether you have taken a loan from our website or anywhere else these tips should help you to negotiate with your lender if you are having difficulties paying back your loan.

What is not acceptable is that some people take a loan and forget to payback even the principal. This is ethically and morally wrong. Lenders helped you in the time of an emergency, and you should try your best to keep your obligations of paying back the loan with interest and in time usually your next payday. Exceptions can be there but you should not take a loan thinking that you will never ever return the money. (Note: Not paying back a loan might lead you in legal trouble with your lenders, so its best avoided. In such a situation please talk to your lender for a way out.)

You should know that almost 10-20% people actually do not payback their loan either in part or in full (we are talking about just the principal, not the interest), and that is substantial risk to the lenders. This is one of the reasons why payday loans are sold at a very high rate. If everyone paid back their loans timely, payday loans would have been much cheaper. 🙁 This default costs lenders a huge amount of their revenue every year. Isn’t that a valid reason for a lender to get very angry when someone defaults? Therefore you should talk to your lender if you don’t have money to payback. Eventually something will come out.

OK, so you took a payday loan and have difficulties paying back, but you are willing to pay. Great. Lets discuss the ways you can negotiate with your lender to get better rates and pay a lesser amount and eventually get out of payday loan debt.

Negotiation Tip 1) Your first step should be to know if your lender has a license to do business in your state. You see out of 50 states in the US, 13 states have banned payday loans. Strictly speaking payday loans are not banned in these states, but the laws are such that it makes payday lending business in these states unfeasible. The rates have been capped so low that payday lenders have closed their shops as these interest will not make profits for the lenders. Here are the 13 states where payday lending is illegal:

1. Arkansas
2. Arizona
3. Connecticut
4. Georgia
5. Kentucky
6. Maryland
7. Massachusetts
8. New Jersey
9. New York
10. North Carolina
11. Pennsylvania
12. Vermont
13. West Virginia

If you reside in any of the above states, technically you cannot apply for a payday loan. But since the laws are so vague in the Unites States that many lenders operating in other states offer payday loans to consumers residing the states where it is illegal. Mostly its done online. Since it is hard for the government to monitor online activities, some payday lenders succeed in offering payday loans to people residing in states where its illegal.

How to know about the lenders business legality? The terms of the loan clearly mentions the name of the lender, their business license number and the business address. You can look for their business information in Dept of Corporations website of your state. For example to look for a business legality in California, you can go to the California Dept of Corporations website. This is located at https://www.corp.ca.gov.

Similarly for your state search Google and enter the business information of your lender in the Dept of Corporations website of your state. If the lender is not there, they do not have license to operate in your state.

If you find that they are not listed, call them and tell them specifically that they did not have the right to do business in your state in the first place, but you are willing to pay the loan back at a competitive rate. They should give you better rates and offer you better terms to pay the loan.

Negotiation Tip 2) As soon as you understand that you may not be able to pay, you should ring your lender and inform them. Ask for options. Usually lenders will ring you one day before the loan is due to inform you that the loan is due and you should keep sufficient amount in your bank account to make sure automated bank debit is passed or the check that you gave to the lenders does not bounce.

Remember that lenders don’t want to take someone to court. For a mere 500 dollars does it make sense to take someone to court? Will you do? If not, lenders won’t do too. But that does not mean they cannot harass you. They can and that is exactly why you should negotiate. Lenders are almost always willing to negotiate, they know after all getting some cash back is better than getting nothing.

Negotiation Tip 3) How to negotiate?

Some people find it hard to negotiate. Well its not that hard. First thing is to know exactly how much can you pay. For example $50 every two weeks if you have taken a loan for $300. 6 installments will clear the original amount. 2 more and you end up paying $100 extra to your lender. That is it. They make a profit, you end up paying back your loan the way you want and not the way lenders demand. Plus you get the time to pay and reduce the interest significantly.

Please note that this is just an example of negotiation. Please do not follow it as it is. Your financial situation may be different. Call your lender for better rates.

Taking the above example as a pointer, you can negotiate with your lender. But first thing is – you should know how much you can afford paying back. Take it from there. Do not budge and please do not pay more than you cannot afford. Be firm and lenders will oblige.

When they oblige, tell them you don’t want to go the direct debit route. You would rather pay by post-dated checks. This will help you to make sure you pay exactly as decided. If you allow them direct debit, a lot of fraud can happen. Auto payments can run forever unless cancelled by the holding authority (your lender). Well it may not happen, but why take a chance? Paying by post-dated checks is the safest way to pay your lender. You can sleep well.

Yes you may have to write and sign quite a few checks, but this will save you from a lot of hassle.

Other points to remember:

Never rollover a payday loan. You will end up paying much more than what you agreed to pay now. Rollovers involve additional fee. Two or three rollovers will actually exceed your original loan. Sometimes you may pay hundreds of dollars to you lender without actually making a single dime payment of your principal.

Make sure the lenders do not pass your debt to a debt collection agency. These guys are even worse. They will call you almost everyday multiple times and ask you to pay. You must avoid these agencies at any cost. Therefore you must talk to your lender before anything of this sort happens.

Debt collection agencies will buy debt from the lender at a lower price and ask you to pay the debt higher than what they have bought so that they can make a profit. As you can see you now pay for their profits as well. Therefore you must at any cost make sure you are not referred to a debt collection agency.

Eventually if that happens – follow the same advice. Tell them what you can pay and ask them to plan accordingly.

Remember lenders too don’t want to get into any trouble or send you over to a debt collection agency. If anything wrong happens eventually (like court cases etc.), even the lenders have to be involved. They would rather stay miles away from courts. They want to concentrate on their business not a few hundred dollars they will get from you.

If a lender is calling you again and again for repayments even after you told them that you are willing to negotiate, you should report this to the Federal Trade Commission at 1-877-382-4357. You can even go their website and report: https://www.ftc.gov/ or here: https://www.ftccomplaintassistant.gov/

Any violations of the Fair Debt Collection Practices Act should be reported to Federal Trade Commission.

You should know the finance laws of your states to handle your lenders better. They will listen to you if they understand that you are familiar with the laws.

If you are in deep debt consider a non-profit debt consolidation agency. They are better than for-profit agencies. There are many please Google it for your area.

Once everything is settled start building your credit. Pay your installments in time. Do not default even once. You have done a lot of hard work to come to this place, now please do not destroy your credit by not paying as promised. You are only paying what you can afford, no excuses here.

Once you are out of payday loan debt start saving and make sure you never have to turn to a payday lender for cash.


Thank you for visiting our website. Hope we helped you get a loan.
Why Not To Get a Payday Loan From Your Bank
Difference Between Payday Loans and Personal or Installment Loans
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