When you take out a payday loan, you agree to pay back the amount you borrowed, plus any fees and interest. But what happens if you can't repay the loan? Defaulting on a payday loan can have serious consequences, including bank overdraft fees, collection calls, damage to your credit score, a day in court, and wage garnishment. No, you can't be arrested for not paying a payday loan. However, if you are sued or ignore a court order to appear, a judge may issue an arrest warrant.
Depending on the lender and when you receive your payment, repayment can take anywhere from two to four weeks. Credit counseling can help you resolve your payday loan issue and provide guidance on your next steps. If you need quick cash to get to your next paycheck, you may be considering applying for a payday loan. But it's important to understand the risks associated with this type of borrowing.
Payday loans come with exorbitant interest rates and fees that often make it very difficult to repay them. If you can't repay the loan, the account may be sent to a collection agency, damaging your credit. Borrowing money from friends and family is a difficult but possibly necessary step to get out of a payday loan hole. The creditor (the payday loan company) certainly has the right to request repayment through legal methods of collection, including filing a small claims lawsuit against the debtor. Getting your payday loans in order is a big step towards rebuilding your finances to get out of debt.
Meanwhile, the outstanding payday loan balance may increase as fees, interest, and penalties are added. If you've stopped paying off your payday loan for a few months and it's gone unpaid, you might start to get a lot of calls and letters about repayment. Lenders don't have to lend the maximum amount and are likely to consider your income when deciding how much to lend. Your loan will be sent to you via this method and will be deducted from your account on the next payday with this method as well. Over time, borrowers are trapped in a debt cycle in which they repeatedly apply for new payday loans to repay old ones. If you have defaulted on a payday loan or are worried that you will stop paying one in the near future, it's important to understand all of the potential consequences.
At some point, the lender might send your debt to collections. In the end, you may owe the amount you borrowed, plus any fees, overdraft fees, returned check fee, potential collection fees, and potential court costs if sued by the lender or collection agency. No matter what situation you're in with your payday loan debt, there are steps you can take to get back on track. Credit counseling will offer steps on how to resolve your payday loan issue and provide guidance on your next steps. Borrowing money from friends and family is a difficult but possibly necessary step to get out of a payday loan hole.
And if all else fails, talking with an attorney may be necessary.