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Heres How the Debt Trap Works The payday lender cashes the check on that payday, before the borrower can buy groceries or pay bills. The interest rates are so high (over 300% on average) that people cannot pay off their loans while covering normal living expenses.
Most states or jurisdictions have statutes of limitations between three and six years for debts, but some may be longer. This may also vary depending, for instance, on the: Type of debt. State where you live.
They are treated in exactly the same way as an overdue credit card, finance agreement or long-term loan. If you repay your payday loan on time and with no issues, it will stay on your credit report for up to 6 years, depending on the credit reference agency.
How Payday Loan Interest Rates Are Calculated. The annual percentage interest rate (APR) for payday loans is calculated by dividing the amount of interest paid by the amount borrowed; multiplying that by 365; divide that number by the length of repayment term; and multiply by 100.
This is known as the statute of limitations. Essentially, a collector only has a limited time where they can take you to court over a debt. The good news for you, Gabriela, is that the statute of limitations for written contacts where you live in California is four years.
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Debt collection activity: Your lender will attempt to collect payment for you for about 60 days. If youre unable to pay them within this time frame, theyll likely turn to a third-party debt collection agency.
The collection account will appear in the public records section of your credit report. This account can only remain on your credit report for a set time seven years from the date the original account became delinquent.
Reasons to Avoid Payday Loans Payday Loans Are Very Expensive High interest credit cards might charge borrowers an APR of 28 to 36%, but the average payday loans APR is commonly 398%. Payday Loans Are Financial Quicksand Many borrowers are unable to repay the loan in the typical two-week repayment period.

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