What Happens if You Don’t Pay a Payday Loan

With millions of Americans surviving by paycheck to paycheck, Payday loans have become a common word in the streets.

Despite Payday loans having very high-interest rates, there are always borrowers seeking them every month.

How Payday Loans Work

To qualify for a Payday loan, you must prove to the lender that you have a regular income flowing. In addition, before the lenders approve your loan, you may have to give them access to deduct their money from your account electronically.

A Payday loan will be a good deal if you need some urgent cash in the middle of the month. One of the terms of a Payday loan is; borrowers should repay in two weeks—usually during the next paycheck.

However, some people dodge paying off their Payday loans after two weeks. And once that happens, it eventually becomes tough to repay later because the interest doubles.

The high interest rates associated with payday loans are for cover if borrowers default to payment.

What Happens if You Don’t Pay Off Your Payday Loan?

If the borrower withdraws all the money from his account before the agreed date of repaying the Payday loan, they will fail to pay.

However, there are consequences attached to failure to pay off the Payday loan. Therefore, it would be best not to take that path because it always ends badly.

• Failure to pay these loans results in the doubling of the interests. For instance, if you had taken a Payday loan of $100 loan at an interest rate of 15%, the initial payment will be $460.

However, if you fail to pay after two weeks, the lender will double the interest for another two weeks. Thus, you will pay $520 after four weeks.

• There will be endless calls and messages from the lender. But, not unless you plan to switch off your phone after dodging a payday loan payment; the phone will not rest until you pay.
• Your bank will charge you a return check fee. These fees apply when there is not sufficient money in your account to repay the loan.
• The lender will forward you to a third-party collection agency. When the agency gets to you, they will add more collection charges.
• Although timely payments don’t affect your credit score, late payments of Payday loans damage your credit score.
• There is a possibility of wage garnishment. Lenders can garnish your wages with a court order in place.
• You will face multiple arrest threats. It’s illegal for a lender to threaten their borrowers with arrest or any other threats, but they do it anyway.
• You may not get loans in the future. With your credit score damaged, you will have a tough time securing any loan in the future.

What to Do

The best thing is to take tiny amounts of loans that you can comfortably pay. Always ensure that you don’t miss the two week-payment plan of a payday loan. You can also consider other Payday Alternative Loans that are cheaper.