Payday loans come with high interest rates and fees that can make it difficult to pay them back. If you can't repay a payday loan, the account may be sent to a collection agency, which can damage your credit. Defaulting on a payday loan can lead to bank overdraft fees, collection calls, a hit to your credit score, a court appearance, and even wage garnishment. The collection company may even take you to court.
This could result in garnishment of your property or wages. Eventually, the payday lender might send your debt to collections. In the end, you may owe the amount you borrowed, plus the fee, overdraft fees, returned check fee, collection fees, and court costs if sued by the payday lender or collection agency. No, you can't be arrested for not paying a payday loan. However, if you are being sued or a court judgment was entered against you and you ignore a court order to appear, a judge can issue an arrest warrant against you.
While each situation is unique, there are some typical consequences when you don't pay a payday loan on time. Apps like Chime, Earnin, and MoneyLion allow users to borrow a percentage of their expected earnings for a small fee and pay it back on their next payday. Any negative checking account balance can also be transferred to an independent collection agency, resulting in two separate collection accounts from one payday loan default. In recent years, payday loans have become increasingly popular in the United States, including in Texas. It is illegal for a payday lender to threaten to put you in jail or criminally prosecute you for an unpaid debt. When applying for a payday loan, lenders usually ask for identification and evidence of your income such as a driver's license and paystub.
If you think a payday lender harassed you while trying to collect your loan, contact DFI to file a complaint. Depending on the lender and when you receive your payment, repayment can take anywhere from two to four weeks. If you can't repay a payday loan, you could pay off the debt for less than you owe or file for bankruptcy if your debts are overwhelming. If you think these payday lenders are bad news, wait until you hear from the mercenaries they hire after not receiving money from you in about 60 days. Often, borrowers don't have enough funds to repay the loan when it matures so they renew it and add another large portion of interest to the debt. Both scenarios give borrowers leverage to pay off the payday loan debt for less than what they owe.
Your loan will be sent via this method and will be deducted from your account on your next payday with this method as well. If you take out a payday loan for an emergency, do your best to pay it back on time and avoid renewing it. Next, you'll have to deal with a collection agency whose collection efforts may be more aggressive than those of the original payday lender. Some states have laws requiring lenders to grant extended repayment plans if requested.