What If I Default On My Payday Loan

Defaulting on any loan is news and reflects negatively on a person's ability to re-pay debt, but not all lenders report defaulting loans or local laws prevent them from doing so. However, people have to know that there are many consequences to defaulting on cash advance payday loans and that these loans should be taken seriously in order to avoid further headaches, fees, and negative credit history. We've had people ask us, "What if I default on my payday loan", what do I do?

Payday Loan Process and Procedures

Payday loans are short term loans intended to be paid back within a two week period, or until next payday. The loans don't have installment payments so credit checks and other traditional forms of verification are not needed, thus making them appealing to those that need cash and don't want to use traditional methods for obtaining it. However, these loans come with a fee for their services, and the fee is based on the amount of money borrowed. Many states cap this amount, but some do not. In addition, many states cap the amount that can be borrowed as well, and some even cap the number of times a person can have a payday loan in a given period.

Payday loans are intended to be paid back in full when they are do. If not, there would be more fees to refinance the loan again, but with no additional money given. Now, the loan fee has doubled since the person didn't pay the first one and is not getting a second one. This can go on for quite some time and put people into further debt. This is where most people end up getting into default on these loans because the fees associated with paying them back have gotten so out of hand because the person didn't pay the original loan back when due.

What happens if a payday loans goes into default?

  • Bank Fees: Given the fact that the loan is secured with a bank account, the lender will keep trying to collect on the loan from the given bank information even if there is no money in there. They will do this regularly until they get their money. Although this doesn't seem like a big deal because they can't get the money if it's not there, the bank may charge a fee every time they try to collect and the funds are not available. If they are depositing the check, the borrower is going to get hit with a bank fee every time they deposit.
  • Criminal Charges: Some states have laws against writing bad checks of if the person is in a state where they have laws forbidden this practice, then the person could face criminal charges.
  • Garnishment of Wages: Not all states allow this, but some do. It is important to check with local laws to find out what the borrower and lender rights are for that area.
  • Phone Calls: Although this may not be a big deal for some, this can be quite annoying. Lenders will hire agencies and other collecting services to continually call and follow-up on money owed and they can be relentless.
  • Legal / Court: If the loan is in a state where it is enforceable, then the lender can take the borrower to court. This could result in more fees for court costs, if the case is won by the lender, and the person would be legally responsible for paying the loan back based on the terms of the proceeding.

As with any loan, defaulting on it can be serious business and could complicate matters even further. There is no easy way to get out of it, and if a person signed on the dotted line to get the loan, they are responsible for paying it back on time. If not, there could be much more worse things to follow including criminal charges, more fees, and negative credit history.

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