- You can go to court if you are unable to repay your payday loan
- You can be sued if you do not repay your loan
- Not repaying your loan can negatively impact your credit score
If you fail to repay your payday loan, there is the chance that your lender will take you to court to secure the money they are owed.
Can payday lenders sue you?
Yes, a paylender can take you to court and, if they win, you will be required to repay whatever the court has issued. Payday lenders will work with clients in an attempt to secure the money they are owed in a way that is in the best interests of both parties. There is the possibility that a lender could take you to court if no other resolution can be found. Taking a client to court will always be a lender’s last resort, as it is expensive and not always successful for the lender.
Not repaying your payday loan could result in a number of outcomes, including a negative impact on your credit score (making it harder for you to borrow money in the future), wage garnishment and debt collectors, however, it is incredibly unlikely that you will go to jail for not repaying your loan.
What Happens if I Get Summoned to Court?
Taking you to court will always be a lender of last resort, wherever possible your lender will try to arrange a sensible repayment program that caters to your needs, which could mean a rollover. However, if co-operation stops or you are unable or unwilling to repay your loan your lender may take you to court.
Lenders don’t just go to court over large cases, lots of lenders will be willing to go to court over relatively small amounts of money. You shouldn’t be surprised if your lender takes you to court over a relatively small loan.
If a lender does take you to court, it’s important that you show up. You should never ignore a lawsuit. A lot of lenders automatically win cases, because their clients do not show up to court. It is always in your best interest to attend court.
What Will Happen if I Don’t Repay my Loan?
Defaulting on your payday loan can drain your bank account, trigger wage garnishment, collection calls and lawsuits. Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan.
The payment lender will set up automatic withdrawals from your account, attempting to regain as much for their loan as possible. This can result in bank fees for you. If this is unsuccessful, your lender may set up wage garnishment, which involves a part of your paycheck being withheld, and going directly to the lender to repay your loan.
During the time in which your loan is not being paid, it will still be accruing interest.
What if I Cannot Repay?
Being unable to repay a loan can be an incredibly stressful situation. If you still need to pay rent and put food on the table for your family that has to come first. In situations like this, it is advisable to seek advice from a nonprofit credit counsellor, bankruptcy attorney or legal aid centre about your next moves.
If you are unable to repay your loans, there is the possibility of claiming bankruptcy. Claiming bankruptcy is something that should be talked over with a professional and will only be appropriate in certain situations.
When you realise that you will not be able to repay the loan, it is best to get in contact with your lender directly and see if you can work out a schedule for repayment that works for both you and the lender. Wherever possible the lender will try to make it possible for you to repay the loan.
It is worth noting that a payday loan is only ever designed to be used as a short term fix, for unpredictable, unexpected one-off payments. A payday loan should be used to bridge the gap between one pay cheque and the next. That means that you should only ever be borrowing for a short period of time.