If the debt goes unpaid after two weeks, your credit can be impacted, and you will want to speak with a specialist for credit repair in Miami, Florida, such as The Phenix Group.
Why Staying Current Is So Important
While taking out a payday loan does not impact your credit, falling into delinquency does. If you fall behind, the lender could sell the account to a third-party collection agency, which will stay on your credit reports for seven years. While you can ask for information to be removed by credit bureaus or request negative credit information be removed, it’s best to avoid letting the payday loan become past due.
What Happens if My Payday Loan Goes to Collections?
If you fall behind on your payday loan repayments, don’t worry. There are steps you can take to repair your credit.
Negotiate the Balance Down
The way a debt collection agency works is by having the collector purchase the defaulted debt at a discount and then attempt to collect the amount due. You may be able to negotiate a reduced repayment amount with them, which will allow them to still make a profit even though you’ll pay less than you owe.
The problem is that a payday loan that went to a collection agency will be a negative mark on your credit report. Rather than being listed as “paid in full,” which bodes well for your credit, it will read “settled” on your credit report for the next seven years.
Get Creative to Pay in Full
If your loan already made its way to collections, you want to avoid being sued by the lender. It is always better for your credit if you are able to repay your debts in full.
Ideas for making this happen include:
- Reducing expenses: Identify costs you can eliminate or reduce so you can put more money towards repaying that debt.
- Generating extra income: It might not be glamorous, but picking up a part-time gig or doing some odd jobs can help you make extra money that can be put towards debt repayment and minimize the damage to your credit.
- Sell unnecessary items and property: Whether you put some prized possessions on Facebook Marketplace or eBay, finding ways to bring in a little extra money while cleaning out your attic can help you repay debt.
Another option is to ask about an Extended Payment Plan (EPP). Check if your state requires payday lenders to offer EPPs–an EPP gives the borrower extra time to repay without incurring any sort of penalty. It does not hurt to check if your lender offers this option.
Contact a Credit Repair Group
Credit repair groups provide you with financial counseling to help you manage your credit. These organizations can help you evaluate all of your options, as well as develop a budget so you can address your debts. They can also help you contact your creditors before your account is sent to collections. Reliable credit repair groups, like The Phenix Group, are well-versed in helping borrowers remove negative items from their credit reports, and can help them prioritize credit repair–even when their payday loans go to collections.