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Can you go to jail because of legal or illegal payday loans? Well many things have been said about payday loans, but few people ever tackle this side of the story. The truth is no lender can send you to jail when you don’t make payments for your payday loans, however they can sue you at court and in this case you could be charged by defaulting in case you lose the case.
To prevent such prevalent frictions between lenders and borrowers, the Financial Protection Bureaus have stepped in to put checks and balances on payday loans to curb debt traps and provide a two way protection for both parties involved.
In the simplest terms here are some of the laws that have been put in place to save borrowers and prevent debt traps.
· Before giving out the loans, lenders must first verify if the borrower can actually pay off the loan along with its interest, fees, and principal amount.
· In order to determine this, lender should check on the borrower’s income, financial liabilities, assets, credit score, and borrowing history among others.
· And if the borrower has just finished paying another loan, debt, or payday loan, they shouldn’t be given any more loans unless they have taken 60 days without any other.
· Meaning that, lenders can only issue another payday loan to a borrower within 2 months period as it is taken that by that time the borrower’s finical status will have improved.
· Additionally, if a lender has issued three consecutive loans to a borrower they shouldn’t be quick to provide them with another one unless they have taken some time off the cycle.
· And that’s not all it is also advised that lenders should provide reasonable payment plans for borrowers and not one aimed at fixing them to pay more or remain penniless.
· Also, like the debt consolidation firms that we have today, lenders are advised to provide ideal payday loan help such as suggesting to the borrower a way out of debt before offering a second debt in a row.
· In fact the way out of debt will include a drop in the principal amount with each loan or the lender could offer an “off-ramp” for the third loan. Meaning that, the third loans could be offered for payback at no extra fees.
Getting shrewd with payday loans is a really helpful idea. It will help you to pay fast, walk out, and develop a financial independence plan. Seek the help of a debt consolidation company.