What Happens When You Can’t Repay a Payday Loan? 

What Happens When You Can’t Repay a Payday Loan?

People with bad credit and immediate fund requirements have to take the help of payday loans. Instant approval, no credit history check, and no collateral are some of the many benefits that you enjoy with a payday loan. But, we wish payday loans could be “all again and no pain.” You will get into serious trouble if you don’t repay your payday loan. 

If you have no idea of trouble coming your way if you don’t repay your payday loan, then read ahead. Before we talk about the troubles you would face with non-repayment of payday loans, let’s talk about the repayment options offered. 

Payday Loans – The Repayment Options 

Payday loans are due for repayment when the borrower receives the next paycheck or salary. 

You need to provide the details of the paycheck receiving day/date. 

Once that date approaches, the lender will automatically charge you for the borrowed money, interest amount, and processing fee from the account. There is no need to write a cheque or inform the bank beforehand. 

Such a sort of repayment process is known as Continuous Payment Authority, or CPA, and is used in various other kinds of bad credit loans offered through top online loan services like this one.

If you have availed of a payday loan from a lender network, then you can also repay the amount, with interest, in hard cash. Basically, the repayment option depends on how you’ve availed of the payday loan. 

Consequences Of Not Paying Payday Loan 

Failing to repay any loan amount isn’t good for the borrower. A payday loan isn’t an exception. Starting from frequent withdrawals to poor credit scores, payday loan repayment can do tons of harm to the borrower. Have a look at the major outcomes of a failed payday loan repayment. 

  • Frequent withdrawal 

As per the ‘Terms of Payday Loan,’ the lender is allowed to make an automatic withdrawal from the borrower’s bank account. If you’re not repaying the amount on your own, then the lender will automatically deduct the amount. 

In the event of a transaction or denial, if the amount of money being withdrawn is high or exceeds the transaction limit, the lender can make the withdrawal of a small amount. This way, the lender can draw money without your consent, which isn’t that good. For each transaction, you’ll be liable to bear the transaction fee. 

  • Actions of collection agencies 

If, for any reason, the lender isn’t allowed to or able to withdraw money, s/he can ask for help from collection agencies. You’ll get multiple calls, notices, and letters for repayment from collection agencies. This will tarnish your image as a borrower in the lender community and will reduce your future chances of availing of a loan. 

  • Legal actions 

The lender can also hire a lawyer and sue you for not paying back the borrowed money. Some states have stringent payday loan laws and you can be a culprit in the eyes of the law if the repayments aren’t made. This will give birth to tons of never-ending hassles. 

  • Poor impact on credit score 

When the lender isn’t getting back the money, s/he will certainly be furious and can report the borrower’s account to the credit bureaus of the corresponding state. If that happens, then get ready to witness a decline in the credit score. 

While credit score is calculated, previous loan repayment is taken into consideration. Any non-repayment will cause a drop-down in the credit score. With a poor credit score, you’re not able to borrow money in conventional ways. Hence, your future funding chances will become bleak.

What’s the Way Out?

All these consequences are harsh on the borrower. But, you can prevent this from happening to you. Have a look at a few of the experts’ tips. 

  • Compare the quotes beforehand and go with a payday loan option that provides an affordable interest rate. High interest makes repayment tough. 
  • Inform your lender and request an extension. If you feel that you need more time for repayment, then it’s best to inform the lender. Don’t inform or hide facts. This will make things worse. 
  • Don’t ever agree to the rollover option. Even though this option seems like a relief, in the beginning, it will only cause more trouble in the long term. So, you better stay away from this option. 

Ending Notes 

With a payday loan, it’s easy to fix any untimely money crunch. But, once you take advantage of this loan, understand your responsibility to repay the borrowed money. If you fail to repay a payday loan, then get ready to face harsh consequences such as bad credit, lawsuits, and a bad reputation in the lending community. Hence, be responsible and repay your payday loan on time. 

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What Happens When You Can’t Repay a Payday Loan? 

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