can a payday lender repossess your home

Can a Payday Lender Repossess Your Home?


Daniel Tannenbaum, Founder of Pheabs Avatar

Reading Time 4 minutes

No, a payday lender cannot repossess or take away your home if you have missed repayments or behind on your debts. This is because your home is not named as collateral in the loan agreement and they do not have any right to come into your home or take any items or possessions out of it to recover their debts.

If you are struggling to repay your payday loan, you will usually incur some late fees and it will negatively impact your credit score. But you won’t get any bailiffs or repo men suddenly showing up at your door or taking your house away.

The only circumstance where this could arise is if you have generated a large amount of debt which is unpaid and the payday lender takes you to court – and only if they win might they be able to garnish your wages and repossess some items or your part of your home. However, payday loans are small amounts and the debts rarely exceed a few hundred or thousand dollars, so not only is court unlikely, it doesn’t add up for a lender to repossess a $200,000 home for a $2,000 debt. In short, you are safe!

What Can a Lender Take or Repossess From You?

When it comes to payday loans, the lender cannot take or repossess anything from you because the loan is unsecured. Yes, there are some important implications that you need to be aware of if you cannot repay your loan, such as late fees, added interest and damage to your credit score, but physically there is nothing they can take in terms of your car, home, furniture, valuables or similar.

But just because nothing gets taken away does not mean that you are getting off scot free. If you leave the loan unpaid, the daily interest will continue to ramp up and make the loan very expensive and you will always be liable for this debt. Your credit score will fall as a result and this can make it much harder to get another type of loan, credit card, rent an apartment or even get a cell phone.

If you are using a secured loan, any item that you use as collateral can be repossessed by the lender if your loan is not repaid by a certain deadline. With title loans which are secured against your car, you are agreeing for the lender to take the car away from you if you cannot repay your loan. This also applies to:

  • Collateral loans (jewellery, cars)
  • Rent to own products (household appliances such as furniture, dishwasher, lawnmower, TVs)
  • Home (if you have a mortgage)
  • Office space (if you are using it as collateral)

You can read more about the rules surrounding repossession and title loans here.

What Can a Lender Not Take or Repossess From You?

A lender, especially a payday lender, cannot repossess anything from you that is not in the loan agreement or used as collateral. So if you use a credit card or payday loan to purchase something such as a new bed, this item cannot be repossessed by the lender because it is not included in the loan agreement and has not been agreed as collateral.

Unlike in TV shows, no one is going to knock on your door and start taking away random household objects that you own.

In another example, if you take out a personal loan and use this money to buy a car, even if you fall behind majorly on repayments, the car cannot be repossessed by the lender because it is not mentioned in the loan agreement or stated as collateral.

Also, if a contract is unenforceable, this means that collateral may not have to be repaid. What makes a contract unenforceable? Maybe if the terms were not clear, the individual was forced to sign it or pressured on behalf of a family member or ex-partner. You can always speak to a lawyer for advice on this.

Can a Lender Garnish My Wages or Put a Lien On My Property?

Yes, a payday lender can garnish your wages since they will automatically try to collect repayment from you using the bank account details you provided.

If the lender takes you to court over a large amount and they win, they can garnish wages directly from your employer – so this is something to be aware of. However, payday loan cases rarely go to court because of the legal fees associated with this.

For large amounts of debts that run in the thousands, if the lender wins in court, they can place a lien on your property which means that they can seize or sell your personal property. This could be valuable items within the house such as furniture, computer, TVs or the entire house depending on the size of the debt.

What Happens If You Do Not Repay Your Loan?

Whilst you can sleep easy knowing that a payday loan company is not going to take things away from your house or your entire home either, falling behind on your payday loan is no laughing matter and should be taken very seriously.

The outcome of missing repayments and falling into arrears includes:

  • Late fee / penalty
  • Added daily interest for duration of the loan
  • Damage to your credit score
  • Difficulty in getting future loans, mortgages, cell phone and renting an apartment
  • Pay higher prices for future financial products (if even approved)
  • A lag to repair your credit
  • Your wife might leave you (just joking, not really)

As soon as you know that you are falling behind on your debts and cannot make an upcoming payment, you should contact your payday lender as soon as possible. Thanks to strict regulation, the lender will be able to help you in numerous ways, including freezing interest, delaying repayment or offering an easier repayment plan so that you can get back on your feet, with minimum added costs and damage to your credit score.

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