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Last Updated on April 19th, 2023 at 04:25 pm

A payday loan, like any type of loan, is a legally binding contract. This means, within reason, you must pay off the money you owe if you are able to. However, there are certain scenarios in which it is possible to get out of paying your payday loans, primarily; you have large amounts of debt and are unable to pay off your debts.


What Will Happen if I Cannot Pay My Payday Loans?

This is what will happen if you stop making your payments and fail to communicate with your lender. Defaulting on your payday loan can drain your bank account, trigger wage garnishment, collection calls and lawsuits. Wherever possible, keep up with your repayments to avoid these outcomes. 

Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan. The 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 begin collection calls, which will involve calling you and in some cases visiting you in person to attempt to collect the debt.

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 accrediting interest.


woman is looking at cash banknotes, not able to repay loans


What Should I Do if I Cannot Repay My Payday Loan Debt?

If you are unable to pay off your loan the very first thing you should do is get in contact with your lender. 9 times out of 10 your lender will be able to work out a better payment program that means you can repay your loan on a schedule that works for you with less financial pressure. Short term lenders will always try their best to ensure that you can repay your loan, so if you begin to struggle to repay, contact your lender first.

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.

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. 


No Money in wallet -payday loans


Can I File for Bankruptcy After I Can’t Pay a Payday Loan?

If after talking to your lender you still cannot repay your debts you do have the option to file for bankruptcy. However, declaring bankruptcy will damage your chances of being able to take out a loan ever again. 

An option to avoid bankruptcy is an IVA – an individual voluntary agreement. This is an agreement between you and your lender that interest will be frozen to help cut down the overall amount you need to pay. This will still negatively affect your credit score but it has less stigma attached than bankruptcy. An IVA can be dealt with privately, as a posed to bankruptcy which is announced publicly.


Will I Go to Court for Not Repaying a Payday Loan?

If a client is unwilling to co-operate with the lender, it is possible for a payday lender to take you to court over your unpaid loan. This will always be a last resort and in the vast majority of cases the court does not need to be involved.

Court cases are not always about large sums of money. It is common for a lender to take a client to court over a relatively small unpaid loan. You should not be surprised if you receive a lawsuit following an unpaid payday loan. 

The important thing is that you communicate with your lender, there is no reason why your case should go to court if you continue to communicate openly with your lender.

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Charlotte Diffey

Charlotte is a talent young writer who has a passion for personal finance and credit. She has a particular knack for answering the tough questions and giving insights and help to people who need it most. She started writing for her University publication and has since made her way into the mainstream press. You can follow her here on Linkedin.