Drowing in Debt

[Salute]

This is my parents in laws dillemma.

 

They got into some rough times a while back and borrowed from 4 payday advance places. They have for about 6 months now only been paying the finance charge of about 1000/mo for all four. The biggest problem is that they pay down NO principal. Every month that happens over and over. Family of 5.

 

The have a take home income of about 4000/mo.

Rent = 1300

Car Fuel ~200

Insurance ~100

Electricity ~200

Natural Gas ~50

Life Insurance ~10

Groceries ~600

Charter Comm. ~100

 

I'm sure they've got a few more bills. But they are not here with me right now. Of course they have two girls in school and that's always costing a little here and there. I really want to help them. The hardest part right now is the payday loans.

 

Two have a balance of about 1500, and the other two are from 900-1000 each. Credit ratings are just under 500.

 

The only thing we could think of was not pay three to pay out 1. Then do that again next month. If there is something we're missing let us know.

 

We appreciate your help and if this is in the wrong place let me know.

Edited April 1, 2008 by Salute

[hegemony]

they still have cable?

[Salute]

Yes. I know I know.

[saladdin69]

That's (bills listed) just a little more then half of income listed. I would get all bills first and start there. Cut cable, internet, cellphones and trim grocery bill. Credit scores are shot so there is no way for bank loans.

 

What is the collateral for the PayDay loans? Did they use car titles? If so, they could lose them if you steal from Paul to pay Peter. Or did they give them access to their bank accounts? Better check on these things before stop paying the PayDay.

 

But if this is their nature to spend more then they earn (and not caused by emergency, medical etc) then I would get ready for them to ask for a loan. Do you have 3K to gift them?

 

 

saladdin

[mdj2000]

They pay $1000/month to service $5000 in debt? Good Christ, I'm glad they're illegal here in good old liberal Massachusetts, that's beyond highway robbery.

[Nummerkins]

Dump the cable and cut way down on the groceries.

 

It all depends how badly do they want to get out of debt.

[Jen23514]

here are some threads with great advice on payday loans:

 

http://creditboards.com/forums/index.php?s...;hl=payday+loan

 

http://creditboards.com/forums/index.php?s...;hl=payday+loan

 

http://creditboards.com/forums/index.php?s...;hl=payday+loan

 

 

 

Personally, I would stop renewing/paying on them. What state are they in?

 

Here's the deal when I got into PDL trouble a few years ago... I stopped paying. They were nasty for awhile and then got sent to collections. I DV'd the collections (1 ended up on my report anyway) and they all wanted to settle for WAY less than I would have owned normally. Luckily (it's relative) one was an internet loan and they charged more interest than KS allowed, and a couple letters to my county DA and one to the KS AG took care of that one

 

They need to stop paying on those, get situated in other areas then deal with it IMO.

[ACH247]

That is exactly what I did. I closed my account and stopped paying them and a couple sent me letters. On the letters there was only the original amount that they said I owed. They stopped adding the interest. If I would have continued to pay them, my balance would not have decreased.

 

Good luck

 

C

[saladdin69]

"Personally, I would stop renewing/paying on them. What state are they in?"

 

Shouldn't they check to see if anything was used for collateral first?

 

saladdin

[Circus]

Payday loans are reprehensible. But the idea that someone should stop paying on a debt they owe is just as reprehensible.

 

That type of "advice" is exactly how payday loan places justify their huge interest rates...by saying it's a riskier loan.

 

I'd say go with the sensible advice here and the first thing they need to do is cut back on the grocery bill. Stop eating out if they are doing that. Cut off the cable. Cut anything non-vital. If they take home $5k a month they should be able to get out of this, but it will require sacrifice.

[Jen23514]

Payday loans are reprehensible. But the idea that someone should stop paying on a debt they owe is just as reprehensible.

 

reprehensible?

 

If they stop paying on it, the interest will stop growing..... sometimes it's just better. I guess if I suggested BK you'd be ok with that? You see people on the boards all the time stop paying CCs and other bills when things get too rough. I'm not suggesting NEVER pay it back, I'm suggesting letting it go into default now may actually HELP the problem.

 

Then once they get the bleeding of interest and fees to stop..... use the ramen-type-budget to get out from the hole that got them using PDLs in the first place.

Edited April 2, 2008 by Jen23514

[hegemony]

Payday loans are reprehensible. But the idea that someone should stop paying on a debt they owe is just as reprehensible.

 

That type of "advice" is exactly how payday loan places justify their huge interest rates...by saying it's a riskier loan.

funny. I've never seen a payday loan place advertise as such.

 

and in this instance it sounds like the PD loan comanies have MORE THEN made the principle they "lent"

[saladdin69]

"If they stop paying on it, the interest will stop growing..... sometimes it's just better."

 

Now I'm confused. How does the interest stop building if you stop paying on the loan?

 

saladdin

[Jen23514]

did you read the links I provided earlier?

 

short answer (since I won't take the time to explain how PDLs work and each state is different, which is why I asked OPs state): after you default on the loan, many (not always) they are not allowed to collect on the interest they would have received, but on the principle of the loan. It is the overwhelming experience of people on the board that once they quit paying the horrendous rollover fees and interest, that the collectors only come after the principle.

[df21084]

did you read the links I provided earlier?

 

short answer (since I won't take the time to explain how PDLs work and each state is different, which is why I asked OPs state): after you default on the loan, many (not always) they are not allowed to collect on the interest they would have received, but on the principle of the loan. It is the overwhelming experience of people on the board that once they quit paying the horrendous rollover fees and interest, that the collectors only come after the principle.

 

Then why on Earth would ANYONE make one single payment? It's no wonder PDL companies charge 400% interest.

[Jen23514]

Then why on Earth would ANYONE make one single payment? It's no wonder PDL companies charge 400% interest.

 

surely it couldn't be because they are trying to take advantage of the people who could afford it the least? These companies are predatory. Payday loans are capitalism at its ugliest.

[ACH247]

When I stopped paying the payday loan, they could not add anymore interest to the loan. I stopped them from withdrawing money out of my account so instead of paying the payday loan for an unlimited amount of time I paid them off quickly. Once they sent me the collection letter and before they got on my credit I paid them and it was only the amount that I owed. Once you stop paying them, they will not continue to add interest and you can pay the principal amount. I had two and I paid them both off but if I would have continued to pay the interest I would still be paying them today.

 

C

[Circus]

I just remain stunned that the answer seems to be why cut back on cable and other non-essentials when you can simply stop paying.

 

OK then...

[Jen23514]

I just remain stunned that the answer seems to be why cut back on cable and other non-essentials when you can simply stop paying.

 

was that directed towards me?

[hegemony]

I just remain stunned that the answer seems to be why cut back on cable and other non-essentials when you can simply stop paying.

 

OK then...

did someone say keep cable?

 

IMHO the person should consider cutting back, but I understand the argument for not continuing to pay the PDL.

[sunshine9924]

To stop paying a PDL is playing with fire, IMO.

 

Back in 1999, I defaulted once on a PDL. The loan was about $400, payback as around $480 (about 380% APR), and it was a place that secures the loan by having you write them a check for the full payback at the time of the loan.

 

Well, I defaulted, and they sent the check to the bank. It bounced.... twice... that was $50 in bank fees.

 

Then within 3 months I was sued in small claims for a bad check, which in my state, they can charge you 3X the amount of the check plus fees. I had a judgment against me for over $1500! Even if I'd closed my account, they can still sue under the bad check laws.

 

What's more, they could have chosen to send my check to the prosecuting attorney for criminal prosecution. They would have only gotten one times the check amt that way, but I could've gone to jail over it. NOT WORTH IT!

 

If this had happened with $4000 in loans, imagine a judgment for $15K when they stop paying all four at once!

 

Indiana has now changed their laws and payday loans can only be "carried over" 6 times, then the consumer is required to take a 7 day break. In other words, the 6th time, you have to pay it off completely and then wait 7 days before you can borrow again.

 

Indiana also instituted an extended payment plan requirement. On the 4th 5th or 6th carry over, you can ask for an EPP and they have to, by law, stop charging interest and let you pay off in 5 payments over 10 weeks.

 

OP - what state are they in? Perhaps their state has some laws you aren't aware of?

[Jen23514]

OP - what state are they in? Perhaps their state has some laws you aren't aware of?

 

I'm waiting for the OP to answer that as well.

 

In MY state, they can't prosecute you for the check you write them when you take out the loan, because they KNEW it was pad when they took it and the post-date of the check is more than is allowed by law (or something to that effect).

 

The state they are in matters GREATLY

[ACH247]

The payday loans I had were from online. I didn't write a check for them. But I sure learned my lesson and will not get one again.

 

C

[sunshine9924]

OP - what state are they in? Perhaps their state has some laws you aren't aware of?

 

I'm waiting for the OP to answer that as well.

 

In MY state, they can't prosecute you for the check you write them when you take out the loan, because they KNEW it was pad when they took it and the post-date of the check is more than is allowed by law (or something to that effect).

 

The state they are in matters GREATLY

 

Here in IN, the PDL places make you date the check for the day you obtain the loan. Post-dating is technically not allowed in IN. The contract with the PDL is the only instrument keeping them from depositing the check during the loan period.

[Jen23514]

see? the state makes a HUGE difference.

 

I'm sorry PDLs caused you all that trouble