What Happens When You Cannot Repay a Fast Cash Advance Loan on Time?

Fast cash advance loans tend to have the highest interest rates of any loans on the market. They are extended to even bad credit borrowers, and they mature very quickly. Because of these factors, it is common for a borrower to be unable to repay the loan on time. Unfortunately, the lender expects this and builds in very high late payment fees. 

Late Payment Fees

Late payment fees on cash advances may be charged if you are even one day late on paying the sum in full. The fees can be as high as 100% of the original loan amount. Borrowers who take these types of personal loans typically have little access to other cash and do not have savings accounts to rely on. As such, the late payment fees are put into place to allow a lender to capitalize even further on the desperate circumstances of the borrower. In fact, lenders often anticipate these late payments or defaults at the time they give the loan. While many low risk lenders would never provide a loan if they anticipated a default, these high risk lenders turn defaults into big profits.

Cycle of Debt

One route to large profits for the high risk lenders is to offer a second loan to pay off the first. Traditional, low risk lenders would not engage in this type of behavior; they would foresee the consequences of creating a cycle of debt for the borrower. Once the borrower has taken one loan to pay off another, and both loans have very high interest rates, it will be nearly impossible for the borrower to escape the debt cycle. Instead of accepting this option, borrowers should look for any other method to repay the loan. Examples include taking a part-time job, budgeting or borrowing money from friends and family.

Aggressive Collections Policies

If a borrower still cannot pay back the loan after attempting these other methods, then the lender will begin applying aggressive collections practices. Some borrowers will find lenders personally showing up at their residences to collect on the fees. The thing to note is most cash advance lenders do not actually report the debt to the credit bureaus. As such, they have limited legal means to recover through other tactics like wage garnishment or a legal proceeding. Instead, they focus on harassment to attempt to collect from any borrower who has missed a payment. Usually, harassment is enough to get borrowers to repay as fast as possible.

Take the Debt to Court

A borrower does not have to give in to the harassment of high risk personal lenders if the lending practices were unethical. If a borrower is victim to predatory lending, the borrower can file a report with the Department of Consumer Affairs in an attempt to resolve the debt. The borrower can even take the lender to court to attempt to have the debt rearranged or dismissed. These techniques will take time and money. The best policy is to avoid these high risk loans. If a borrower has no option but to take one, then the borrower should budget strictly in order to pay it off in time.

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