Being able to take out a loan when you need some extra cash is very convenient, and it can even save the day if you are faced with an unexpected expense. However, if you fail to pay back your loan according to the terms set out by your lender, you will have to deal with consequences.
Before you decide to take out a payday loan, make sure you will be able to repay it when you get your next paycheck. If you can’t respect the terms of your payday loan, you could get into debt and face some serious consequences. If you can repay your payday loan when it’s due, you will have no problem. But if you think you might have to default on your payment, you should consider another type of loan instead, or talk with a credit counselor to get some help and advice.
Payday loans are particularly convenient, as they allow you to receive the money you need quickly, no credit check required. But even if the amount you borrow is small, you could still get in trouble if you default on your loan. Have you ever wondered what happens if you don’t pay a payday loan? Find out what happens if you don’t pay a payday loan on time:
1. What exactly is a payday loan?
Most people who borrow money are probably worried about what happens if you don’t pay a payday loan on time. If you have never taken out a payday loan before, you should learn more about this type of loan before you decide if it’s a good option for you.
A payday loan is a short-term loan that can be compared to getting an advance on your next paycheck. Typically, a payday loan lender will offer you up to 50% of your income, and you will be expected to fully repay your loan on your next pay day. You don’t need to be employed to apply for a payday loan, but you do need to have a regular source of income.
2. Try to negotiate with your lender if you can’t repay your payday loan
When you get a payday loan, you can be sure that your lender will want you to be able to repay your loan as soon as possible. Things will be a lot more simple for them if you can pay what you owe them, than if you default on your payday loan.
If you can’t repay your loan, don’t try to hide from your lender and to simply wish your debt will go away if you ignore it. It won’t. Instead of hiding, get in touch with your lender and explain them why you won’t be able to pay them. See if you can negotiate, or get a payment plan that will meet your needs.
3. Your lender will withdraw as much money as they can from your bank account
If you can’t make an agreement with your payday loan lender, they will try to withdraw the money you owe them from your bank account. They will drain your bank account if necessary, and you will have to deal with bank fees.
If there isn’t enough money in your bank account to repay your loan, your lender will probably start contacting you to ask you to repay it. If after calling you repeatedly and sending you letters, they are not able to get you to pay what you owe them, your lender might use the services of a debt collection agency, or sell your debt to debt collectors.
4. Debt collectors could start harassing you
When a debt collection agency gets involved, they will start contacting you to get you to pay what you owe. Receiving constant phone calls and letters from debt collectors can generate a lot of stress and anxiety, even if they are not threatening you or trying to intimidate you.
But being harassed by debt collectors will not make some extra money appear in your bank account. If the situation goes on, the debt collectors could threaten to garnish your wages, or even to sue you.
Getting involved in a lawsuit over a debt sounds terrifying. But if ever this happens to you, don’t ignore this lawsuit.
Many debt collectors win simply because the person they have sued did not show up to court when they were summoned. And if you let the debt collectors win the case without even trying to defend yourself, your financial issues could get much worse.
5. Your credit score could be negatively affected
Even if your debt collectors don’t threaten to sue you, the simple fact of seeing your payday loan debt transferred to a debt collection agency could negatively affect your credit score.
If your credit score goes down, you might find it difficult to get a loan in the future, and if you do get a loan, your interest rates will be higer. You might have trouble finding a job, finding an affordable apartment, and getting insured for a reasonable rate.
Many things could become more expensive or more difficult to gain access to, simply because you had to default on a small payday loan.