We understand the stress and fear that many feel when they find themselves in the unfortunate situation of being unable to meet loan repayments. Here we will breakdown the worries to help you understand what could happen if you cannot repay your payday loan.
The main implications are:
- Follow up emails, calls and letters from your lender
- Late fees and added interest
- Negative impact to your credit score
- May be difficult to get future credit elsewhere
What Should I Do If I Cannot Repay?
When you realize you will be unable to meet a scheduled loan repayment (including pay day loans), contact your lender immediately. Your lender will try to find an arrangement that makes it possible for you to repay the loan. You may be able to agree to a payment schedule that would be more affordable.
It can be incredibly stressful when you find yourself unable to meet your loan repayments. You may become worried about how you will support yourself or your family financially. There are nonprofit credit counselors, bankruptcy attorneys, or legal aid centers that can help you find out more about your options and plan for a better and brighter financial future. In certain situations where you are unable to repay your loans, claiming bankruptcy may be a relevant possibility. Declaring bankruptcy should always be discussed with a professional.
What Will A Payday Lender Do If I Cannot Repay?
A lender may take multiple actions in response to you defaulting on your payday loan. Your lender may choose to enforce wage garnishment, lawsuits, and debt collection. While very rare, jail time has also been given for failure to repay money owed. Following the agreed loan period, the lender may implement one or more of these actions to obtain any unpaid funds. They may instigate automatic withdrawals from your bank account, which could result in bank fees for yourself. If this proves to be unsuccessful, they could set up wage garnishment. This would involve a portion of your wages being withheld and then sent directly to your lender.
Will I Be Summoned To Court?
A lender will try to create an alternative payment arrangement that suits both of your needs. If a lender can find no alternative or a client is uncooperative, they may take you to court for not paying back a payday loan. Don’t be surprised if your lender takes you to court over a relatively small amount of money. Lenders will bring small and large cases alike to court to get the money they are owed.
If you are summoned to court, make sure that you show up! Never ignore the lawsuit and turn up in court when you have been asked to do so. |In many cases, lenders automatically win cases, because clients do not attend court. No matter your circumstances, it is always in your best interest to show up to a court date.
Will I Go To Prison?
In most cases, you do not need to worry about going to prison for failing to repay a loan. If you haven’t managed to meet a repayment on time, you may fear that you are facing jail time, but in the vast majority of scenarios, this is not the case. If you cannot repay your payday loan, this will negatively affect your credit rating, making it more challenging to borrow money in the future. You should carefully consider whether you have any way to settle your payday loan debt to avoid dealing with the repercussions. If you have failed to meet the agreed-upon payments on time, your loan will continue to gather extra interest making the debt difficult to manage.