Advise the lender you are stopping payments. Notify the cash advance company that lent you the payday loan money in writing that you are unable to pay and are stopping all payments. This will send your account to a collections agency, which will then attempt to collect on the money owed.
Notify the lender and collections agency to contact you only in writing. To avoid harassing telephone calls, you must let the lender and collections agency know (in writing) that you only want them to contact you via postal mail. They must abide by your request in accordance with federal law. (See Resources for a link to experlaw.com on the subject.)
Research your state law. Now that you have given yourself some time to think about what to do without being harassed, read about your state's laws about payday loans. Some states have outlawed payday loans; others have limited the amount of interest that can be charged. If your cash advance lender has broken the law, you will have an easier time settling your account. Call your state regulator if the cash advance lender is not complying with the law. (See Resources for link to PaydayLoanInfo to see your state's rules.)
Notify the collections agency that you want to settle. Although a collections agency can take you to court to sue for the amount owed, most collections agencies would prefer to settle the case and take a lesser sum of money to avoid a court action. Let the collections agency know that you would be willing to negotiate a settlement. If they refuse, you should contact a bankruptcy attorney for advice. (See Resources for links to search for an attorney.)
Ask for a payment plan. If your collections agency does not agree to a lump sum settlement amount that is agreeable to you, consider accepting a settlement involving a payment plan. Some states require collections agencies to accept payment through an installment plan. This would provide you with an easier way to repay the money you owe. Even if your state does not require a collection agency to do this, it might prefer to receive money under an installment plan than to run the risk of having to go to court for a judgment against you and then try to recover payment of that judgment.
Consult a debt settlement program. If you are unsuccessful at negotiating a settlement with the collections agency, look for debt settlement programs in your area, including private debt settlement companies as well as nonprofits such as Goodwill Industries. You may be able to have them settle the loan on your behalf and then work with you to consolidate your debt and pay them back as time goes on. To search for settlement programs in your state, visit debtconsoolidationcare.com.