If you cannot repay your payday loan, your lender will take steps to recover its losses.
Your lender can decide to charge you a late repayment fee, to raise your interest rate, and they will start calling you to discuss your repayments.
They can report your late payment or non-payment to credit bureaus, which will lead to a drop in your credit score.
In this article, we will discuss what could happen if you cannot repay your payday loan and what your options are.
What Are The Consequences of Defaulting On A Payday Loan?
Defaulting on a payday loan can have many consequences.
- Your lender may attempt to collect the debt by contacting you directly or by hiring a collections agency.
- If they are unsuccessful, they may then report the debt to one or more of the three major credit bureaus, which could damage your credit score.
- In some states, your lender may also be able to sue you for the outstanding balance of the loan.
- Additional fees and interest may be added to the amount you owe, and this can quickly spiral out of control. This can make it very difficult to catch up on your payments, and you may find yourself struggling to pay off the debt for months or even years.
If you find yourself in this situation, the best thing to do is to contact your lender immediately and try to work out a repayment plan.
Many lenders are willing to work with borrowers who are having difficulty repaying their loans.
You may also want to consider speaking with a financial advisor or credit counselor who can help you get back on track.
Once you found a potential counsellor, you can check them with your state consumer protection agency to make sure you’re in safe hands.
Will I Go To Court For Not Repaying My Payday Loan?
You might have to go to court if you cannot repay your payday loan. The lender may sue you and try to collect the money you owe them.
If you do not show up to court, the lender may get a judgment against you. This means that the lender could get authorized to take your money from your bank account or your paycheck.
You can avoid being sued and going to court if you pick up your phone and call your lender to make new arrangements for you to pay your loan back.
You can avoid defaulting on your payday loan by contacting your lender and making alternative payment arrangements.
Will I Go To Prison For Not Repaying My Payday Loan?
You will not go to prison for not repaying a payday loan. This is a common myth about payday loans.
The truth is, you can only be sent to prison for payday loans by committing fraud or writing a bad check – and neither of these things has anything to do with taking out a payday loan.
So, if you’re struggling to repay your payday loan, don’t worry – you won’t go to prison. Make sure you show up to court if the lender decides to pursue legal action!
However, you may still be subject to the other consequences we discussed above, such as damage to your credit score or being sued by your lender.
What Should I Do If I Cannot Repay My Payday Loan?
If you cannot repay your payday loan, the most important thing to do is to contact your lender immediately. You should explain your situation and try to work out a repayment plan.
Most lenders are willing to work with you to avoid you defaulting on your loan. They can reduce your monthly repayments, increase the length of your loan, or change your repayment dates.
In some cases, all you need is a little deadline extension, which is an easy fix.
Contact your lender before your payment is late if you know you will have difficulties.
You could also ask your family or friends to help you out financially in the short term. They obviously won’t charge you any interest in the amount they lend you.
If you have this option, it could get you out of immediate trouble and give you some breathing space to get your finances in line, so you can pay back what you owe.
You may also be able to refinance your payday loan or take out a new loan to pay off the original loan, in case your lender is not helpful and friends cannot help. However, this is not always an option and it is important to read the terms and conditions of your loan carefully before taking out a new loan.
Your credit score can suffer if you don’t pay back your payday loan.
Key Points to Remember
- If you find yourself in a situation where you will not be able to pay your payday loan back, the most important thing to do is to contact your lender immediately and try to work out a repayment plan.
- Defaulting on a payday loan can have serious consequences, such as extra fees, higher interest, damage to your credit score, and even being sued.
- You will not go to prison over an unpaid payday loan.
- It is best to seek professional help if you cannot repay your loan.