Payday Loan Consolidation in California

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A Complete Guide to Payday Loan Consolidation in California

Despite the state's no-nonsense view of payday lending, Californians can still run into trouble with these high-interest, short-term loans. For those struggling with mounting debt due to payday loans, there is a solution for borrowers: payday loan consolidation 

Payday loan laws in California

California has some of the strictest regulations on payday loans in the country. The state has a $300 loan limit and loans can only last 31 days. Referred to as “deferred deposit transactions” in California, these types of loans carry an APR of 372%. 

Additional fees include $17.64 per $100 plus 15% of the amount advanced (up to $45). There are no rollovers and borrowers can only take out one payday loan at a time. However, there is no cooling-off period between two loans, meaning once you pay off one, you can immediately take out another. There is also a maximum $15 NSF fee. 

Lenders need to be licensed by the Department of Financial Protection and Innovation (DFPI) in order to legally operate in the state. It is also required that all transactions between a lender and a borrower must be recorded in a legal contract. The document should state information about the loan amount, the interest rate and fees, as well as the terms and conditions. Borrowers are required to provide their ID card or driver's license number. The contract itself must be written in the primary language used during negotiations between the borrower and the lender. 

What will happen if you can’t repay a payday loan in California

While a borrower may face a lawsuit, a judgment in court, or the seizure of assets by the lender if they are unable to pay back their payday loan, they cannot go to jail for failing to repay. Lenders cannot threaten borrowers with jail time either. 

Though lenders must be licensed to hand out loans, they are not required to check a borrower’s ability to repay. You enter into an agreement at your own risk. That said, borrowers can contact the Department of Financial Protection and Innovation (formerly the Department of Business Oversight) if a lender has overstepped. There you can file a complaint regarding lender actions.

What is the statute of limitations on payday loans in California?

In California, the statute of limitations on payday loans is four years. This means that if you are unable to pay back your loan, the lender has four years to try and collect the debt via the court system. 

How to consolidate your payday loans in California

Fortunately for borrowers, payday loan consolidation offers a way to escape the high-interest debts that are eating away at your paycheck. Payday loan consolidation, which is also called credit consolidation and payday loan relief, is a strategy that lumps all of your loans together to give you one easy-to-manage monthly payment. Typically borrowers will collaborate with a third party that works with you to make your payment plan manageable. They will usually pay off your current loans and negotiate with lenders to reduce any outstanding loan totals, In exchange, borrowers pay them a fixed rate going forward, instead of paying the lender. 

Another option is to simply take out one larger loan that you use to immediately pay down all your other loans. This can be helpful to get all your loans on one plate with a single interest rate and payment to worry about. However, like most loans, they are subject to late fees and penalties that could increase what you owe. If you're in need of some financial breathing room, payday loan consolidation is an option you should consider. 

A debt management plan (DMP) is another method you can pursue. DMPs are usually set up by credit counselors who work for nonprofit credit counseling agencies. A DMP is similar to payday loan relief because you pay one set monthly payment on a collection of your debts rolled together at a lower interest rate. The difference is that you’re still paying back your original loan amount, as opposed to entering a payment plan with a third-party company that wiped out your original debt when you entered into an agreement with them.  These plans usually cost between $25 to $70 pert month.

By the numbers: Payday lenders in California

  • Maximum loan term: 31 days
  • Average loan amount: $300
  • Maximum loan amount: $300
  • APR Cap: None, average is 372%
  • Number of payday lenders in California: 1551 (as of 2019)
  • Average 14-day payday loan APR: 372%
  • Collection fees: $17.64 per $100.00 plus 15% of the amount advanced (up to $45). 
  • Poverty rate in California: 11.8%

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How can I get help paying my payday loan in California?

If you find yourself in need of assistance with your California payday loan, getting some form of payday loan relief is essential. Whichever debt consolidation method you choose, it can be the first step back toward financial stability. Contact the Department of Financial Protection and Innovation if you are in need of payday loan help, there you can also file a complaint about a lender or issue you’ve encountered. 

Additional state resources to utilize:

Department of Financial Protection and Innovation

1515 K St #200

Sacramento, CA 95814

Phone: 916-327-7585 or 866-275-2677 (toll free)

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