A lot of people seek out payday loans when other credit options are unavailable. Because payday loan lenders do not perform credit checks, these services are ideal for those who need quick cash but have credit problems. However, as with all financial transactions and sources of credit, these loans need to be treated responsibly; although payday lenders do not check a borrower's credit, they do report defaulted loans to the credit agencies. As such, it is a very bad financial decision to break contract with a payday loan lender.
All loans have repayment terms; payday loans are no different in this respect. When obtaining a loan, a borrower must sign a loan agreement which indicates the required date of repayment. The loan agreement is a contract between the lender and the borrower that protects both parties; the lender is guaranteed that its investment will be returned and the borrower is guaranteed that the lender will adhere to the loan conditions. Without a loan agreement, both parties would be left unprotected; thus, a loan contract should be treated with the utmost respect.
Failure to comply with a payday lender agreement will lead to default, which will negatively affect the borrower's credit. There are a few steps that a borrower should take to avoid breaking contract and the negative consequences of such an action.
In order to ensure that a loan agreement is followed, the borrower must first understand the terms of said loan. Blindly signing any financial agreement is foolish. A borrower must be sure that he/she fully comprehends loan terms prior to signing the document. The loan agreement will outline the terms of repayment, conditions of renewal, fees and interest rates, and the consequences of non-payment. If the loan document is missing any of this information, the borrower should not sign it, as the lender may be predatory. Never sign a loan contract that does not clearly spell out terms; by doing so, a borrower puts him/herself at risk for serious financial repercussions, such as exorbitant fees and interest.
Furthermore, if unsure about any portion of the contract, the borrower should refrain from signing until the document is fully grasped. The payday loan lender should be able to clarify any areas of the document that are unclear, but this requires that the borrower asks for clarification; if the lender cannot answer a borrower's question, they may not be a reputable lender.
Once the transaction has been completed, the borrower should keep a copy of the loan agreement for his/her records. The signed document is the only proof of terms and conditions; if a lender is unscrupulous and claims that the borrower agreed to different terms, the borrower will be left with little backing and big costs if he/she doesn't have a copy of the agreement. The contract is the only protection that the borrower has, should the lender prove dishonest.
Lastly, a borrower should get everything in writing. A verbal agreement is not sufficient when dealing with payday loan terms. A borrower must be wary, requiring all conditions and promises in print.
The best way to protect one's self and avoid dings to one's credit is to be fully aware of the contracts terms prior to agreement. Once a borrower knows what he/she is agreeing to, he/she should do his/her utmost to uphold the terms of the loan.
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