Same day loans are an increasingly popular source of short-term financing. When taking out a same day loan, it is important to be aware of the potential penalties associated with missing or late payments. This article will explore the criteria and penalties associated with same day loan repayment, how they compare to each other, and the best ways to avoid them.
Penalty Criteria
There are four main criteria that affect the penalties associated with same day loan repayment: default, unpaid interest, missed payments, and late payments.
Default
Defaulting on a same day loan occurs when the borrower is unable to make payments for an extended period of time and the loan is declared to be in default.
Unpaid Interest
Unpaid interest occurs when the borrower does not make payments on the interest associated with the loan.
Missed Payment
A missed payment occurs when the borrower misses a payment or fails to make a payment within the agreed upon timeframe.
Late Payment
A late payment occurs when the borrower makes a payment after the agreed upon due date.
Penalties for Each Criteria
The penalties associated with each of the criteria will vary depending on the loan agreement and the lender.
Default
When a loan is declared in default, the borrower can expect to incur the following penalties:
- Fees: The borrower will likely have to pay a default fee. The exact amount of the fee will depend on the loan agreement.
- Credit Score Impact: Defaulting on a loan can have a significant impact on the borrower’s credit score.
- Legal Action: The lender may take legal action to recover the debt.
Unpaid Interest
When the borrower does not make payments on the interest associated with the loan, the following penalties may apply:
- Fees: The borrower may have to pay a late fee or other fees associated with unpaid interest.
- Interest Increase: The lender may increase the interest rate on the loan or impose additional fees to cover the unpaid interest.
- Credit Score Impact: Unpaid interest can have a negative impact on the borrower’s credit score.
Missed Payment
When the borrower misses a payment or fails to make a payment within the agreed upon timeframe, the following penalties may apply:
- Fees: The borrower may have to pay a late fee or other fees associated with missed payments.
- Credit Score Impact: Missed payments can have a negative impact on the borrower’s credit score.
Late Payment
When the borrower makes a payment after the agreed upon due date, the following penalties may apply:
- Fees: The borrower may have to pay a late fee or other fees associated with late payments.
- Credit Score Impact: Late payments can have a negative impact on the borrower’s credit score.
Comparing Penalties
It is important to compare the penalties associated with each of the criteria in order to understand the potential consequences of missing or late payments. Generally, the penalties associated with default are the most severe and can include legal action. Unpaid interest can also have significant consequences, including an increase in the interest rate and a negative impact on the borrower’s credit score. Missed and late payments can incur fees and can have an impact on the borrower’s credit score.
Avoiding Penalties
The best way to avoid penalties associated with same day loan repayment is to make payments on time. Additionally, the borrower can automate payments, ensure that there are enough funds in their account, and negotiate payment options with the lender.
Potential Penalties for Early Repayment
In some cases, the borrower may incur additional fees for early repayment. It is important to read the loan agreement carefully to understand the potential penalties for early repayment.
Impact on Credit Score
Defaulting on a loan, failing to make payments on the interest associated with the loan, missing payments, and making late payments can all have a negative impact on the borrower’s credit score. It is important to understand how each of these criteria can impact the borrower’s credit score before taking out a same day loan.
Potential Alternatives to Same Day Loans
If the borrower is unable to meet the repayment terms for a same day loan, there are a number of alternatives that may be available. These include taking out a longer term loan from a traditional lender, applying for a credit card, or seeking other sources of financing.
Conclusion
Same day loans can be an effective source of short-term financing, but it is important to understand the potential penalties associated with repayment. This article has explored the criteria and penalties associated with same day loan repayment, how they compare to each other, and the best ways to avoid them. Additionally, potential penalties for early repayment and the impact on credit score have been discussed, as well as potential alternatives to same day loans.
References:
McDermott, G. (2020). What Is a Same-Day Loan?. Retrieved October 30, 2020, from https://www.valuepenguin.com/loans/what-is-same-day-loan
MyBankTracker. (2020). How to Avoid Payday Loan Penalties. Retrieved October 30, 2020, from https://www.mybanktracker.com/loans/avoid-payday-loan-penalties
NerdWallet (2020). What Is a Missed Payment and How Does It Affect Your Credit?. Retrieved October 30, 2020, from https://www.nerdwallet.com/blog/finance/what-is-a-missed-payment-and-how-does-it-affect-your-credit/
Other related queries
What are the consequences of not repaying a payday loan?
If you are unable to pay back a payday loan, there can be serious consequences. Payday loans often come with high interest rates and fees, making them difficult to repay. Your account may be sent to a collection agency, which can have a negative impact on your credit score.
What benefits can you gain from paying off a loan ahead of schedule?
Paying off a loan ahead of schedule can bring several benefits. It can lower your total interest charges, reduce your monthly payments, and help you become debt-free faster. Additionally, it can help you establish a positive credit history if you make the payments on time.
What can I do to ensure I make my payment to Speedy Cash on time?
Making your payment on time is easy with Speedy Cash! You can set up automatic payments so that you don’t have to worry about missing a due date. You can also make payments online or in person at any of our convenient locations.
What Can You Do to Avoid Missing a Payment?
Stay on Top of Your Payments
To help avoid missed payments, you should plan ahead. Mark important dates related to your loan in a calendar, set up automatic payments, or ask your lender for reminders. This can help you stay on top of your payments and protect your credit.
What makes payday loans a difficult financial commitment?
High fees and short terms can make it difficult to pay back a payday loan on time. According to the CFPB, more than 4 in 5 payday loans are reborrowed, with nearly 1 in 4 being reborrowed nine or more times.
What steps can I take to overcome a payday loan?
There are some great steps you can take to get yourself out of payday loan debt:
- Ask your lender for a repayment plan.
- Pay off the loan with a lower interest debt.
- Set a goal to not take out any more payday loans.
- Pay extra on the loan when you can.
- Look into debt settlement or bankruptcy.
