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A Complete Guide to Payday Loan Consolidation in Michigan
When it comes to payday loans in Michigan, fees are the name of the game. With double-digit percentage fees on top of uncapped APRs, a payday loan in Michigan will undoubtedly cost borrower’s a pretty penny. However, for those struggling to pay back their endlessly increasing levels of debt, there is a solution: payday loan consolidation.
Payday loan laws in Michigan
Laws governing payday loans, or “deferred presentment service transactions,” in Michigan have not changed much over the last 20 years. The practice is legal in the state, with borrowers being limited to a $600 amount per lender, though they are allowed to take out two loans simultaneously. Loan terms last a maximum of 31 days. With no cap on APR, payday loans have an average interest rate of 369% in the state.
For each $100 taken out by the borrower, lenders can charge an additional 11-15% fee on the loan. The first $100 is capped at 15% and proceeds in descending order from there, with a $500 or $600 loan having an 11% additional fee cap. Lenders can also charge a $25 insufficient funds fee if a payment is defaulted on. Rollovers are not allowed in Michigan.
The Deferred Presentment Service Transactions Act, which governs payday loans in Michigan, requires the lender to provide a written contract for the borrower to sign. The document should be forthright about the APR of the loan, the repayment terms, and any additional fees.
State laws dictate that if a borrower cannot repay in time, an installment loan payment plan should be established. Lenders can charge $15 for this transition. If the borrower feels the lender acted against the law, they have the ability to notify the lender with a letter. If the lender is at fault for such a violation, the lender must pay the borrower five times the fee (minimum of $15) associated with the loan.
Payday loans are regulated by the Michigan Department of Insurance and Financial Services.
What will happen if you can’t repay a payday loan in Michigan
While borrowers cannot go to jail for being unable to repay their payday loan, the lender still has the power to pester you. Lenders can bring borrowers to court for failing to repay along with having the ability to contact you directly asking for money. Lenders are not required to check a borrower’s ability to pay back their loan, so you enter into an agreement at your own risk. If you run into an issue with a lender, contact the Michigan Department of Insurance and Financial Services to file a complaint.
What is the statute of limitations on payday loans in Michigan?
The statute of limitations in Michigan is six years. This means lenders have six years to try and collect the debt via the courts if the borrower is unable to pay back their loan.
How to consolidate your payday loans in Michigan
Payday loan consolidation helps borrowers rid themselves of high-interest debt. This strategy, also sometimes known as credit consolidation or payday loan relief, streamlines a borrower’s total loan amount with a flat interest rate so the borrower only pays one monthly payment. Borrowers will typically partner with a third-party company that does the heavy lifting for them, negotiating with creditors to lower the amount a borrower owes. The debt consolidation company then pays off the current outstanding debts from lenders. In exchange, you make payments directly to the debt consolidation company at a fixed rate.
Another option for borrowers to consider is to take out a separate loan to use to wipe out your other loans. This allows a borrower group all of their smaller, high-interest loans into one bigger loan with a fixed interest rate. This makes monthly budgeting easier because you know exactly how much you need to pay each month. However, this choice has its drawbacks. The loan will have a higher monthly payment (though it might be lower than the multiple monthly payments you make before consolidation), plus borrowers would still have to pay additional fees and penalties if they miss a payment, and those could drive up the amount you owe.
A debt management plan (DMP) is another method to consider. Like the other options, a DMP also rolls all of your loans together into a single debt with a lower interest rate. But in this case the borrower is usually working with a nonprofit credit counseling service rather than a third-party company. With this plan, the borrower simply consolidates their original loans and works to pay them back all at once. This is usually less expensive than a debt
Borrowers in Michigan can always explore local options for assistance with their payday loans.
By the numbers: Payday lenders in Michigan
- Max loan term: 31 days
- Average loan amount: $300
- Maximum loan amount: $600
- APR Cap: None, average is 369%
- Number of payday lenders in Michigan: 391
- Average 14-day payday loan APR: 369%
- Collection fees: An 11-15% fee per $100, a $25 NSF fee, and a $15 installment loan transition fee
- The poverty rate in Michigan: 13%
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Other resources for help paying my payday loan in Michigan
Payday loan debt is accompanied by a tremendous amount of stress for the affected borrower. A quick, short-term loan suddenly spiraled into a debt cycle that has been impossible to escape from. Luckily, payday loan consolidation can be the first step back toward financial stability.
P.O. Box 30220, Lansing, MI 48909
530 W Allegan St 7th Floor,
Lansing, MI 48933
Phone number: 517-284-8800 or 877-999-6442
Additional state resources to utilize: