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What Happens When You Don’t Pay Back a Payday Loan?

Have you ever wondered what happens when you don’t pay back your payday loan, or what happens if you default on your payments? Well, we’re here to help you understand the process of paying back a payday loan and to tell you exactly what happens when a payday loan goes unpaid!  

What is a Payday Loan? 

A payday loan might seem like a quick fix if you’re facing unexpected expenses. These loans are meant to be repaid in full with your next paycheck and typically range from a few hundred dollars to a few thousand dollars. While they offer immediate cash, it’s important to know about the fees and interest rates that come with them. Before getting a payday loan, take the time to explore all your choices and fully grasp the terms and expenses involved. 

Payday Loans: Benefits, Risks, and Repayment 

Let’s discuss the pros and cons of these loans to determine whether they’re the right fit for you. 


  • Payday loans are known for their speed. You can get approved and walk out with the money the same day you apply. 
  • Unlike traditional loans, payday lenders don’t usually check your credit score. No credit checks can be helpful if you have bad credit or no credit history. 

Risks to Consider 

  • Payday loans have higher interest rates and fees than bank loans, which can add up. 
  • Payday loans are similar to bank loans in many ways. For example, if you miss a payment, you are charged interest, and if you miss several payments or refuse to make payment arrangements, eventually, it will affect your credit.  


Since a payday loan is due on the next payday, payback dates may differ depending on your pay/income frequency. You must repay your loan within two weeks if you receive your paycheck bi-weekly. Whereas you are expected to repay your loan within a month if you are paid monthly. 

However, no matter what pay frequency you receive your income on, the loan must be paid back by your next payday.  

The True Cost of Borrowing 

While payday loans offer quick access to cash, be mindful of the overall cost of borrowing. It isn’t about hidden fees or surprises but rather understanding the upfront and ongoing costs so you can make informed financial decisions. 

Payday loans typically have higher interest rates than traditional loans. Knowing the interest rate will help you calculate the total cost of borrowing and budget accordingly. Moreover, additional fees might be associated with payday loans, such as application or origination fees. Understanding these upfront costs allows you to factor them into your repayment plan. 

It’s not just about the initial loan amount but the total price tag, including interest and fees. Here’s where the cost of borrowing calculators comes in handy. These free online tools can be powerful in your financial decisions: 

  • Compare loan options to give you a side-by-side comparison of the total repayment cost for each loan. 
  • Cost of borrowing calculators can estimate your monthly payments and total interest paid over the life of the loan. 
  • Identify additional loan-related costs beyond the interest rate, like origination fees or prepayment penalties.  

What Happens if You Can’t Repay Your Payday Loan on Time? 

If you are unable to pay back your loan, the best thing you can do is call the company you borrowed from ahead of time so you can make payment arrangements. However, this doesn’t go without some penalty, as you will be charged more interest on your loan per day that you are late. However, calling the lender before your due date can save you a lot of hassle!  

Most payday loan companies understand that life happens and that the unpredictable is unavoidable. If you are honest about your situation with your lender, most lenders will try to help you develop a plan to pay back your loan.  

Lenders are happy to make arrangements so everyone ends up in a good place. Some lenders may extend your due date, while others may allow you to make multiple payments. Whatever it may be, the results will be better than defaulting and ignoring your loan. Carefully review your loan agreement to understand the specific late fees, collection practices, and potential legal actions associated with non-payment. 

What Happens If You Default on a Payday Loan? 

Talking with your lender can result in agreements that can help you in your current situation. However, if you choose not to repay your payday loan, the first step will be to send your loan to Collections.  

At this stage, lenders will take necessary actions to recover the money they lend you. It’s important to remember that the money you borrowed is not yours; it belongs to the lenders. Therefore, they have the right to seek repayment from you. Collectors will attempt to contact you by phone, e-mail, and mail to recover the outstanding balance. 

Depending on how you obtained the loan, a failed payment attempt, such as a post-dated cheque, could result in insufficient funds fees from your bank. 

Odds are, you will be contacted daily via e-mail, call, and text. With no direct contact, they will attempt to debit your account to recover their funds, which they have every right to do. Watch out here – this may result in unwanted NSF fees on your part. 

Defaulting on your loan may harm your financial situation more, so. it is better to contact your lender and inform them about your situation. If all else fails, most companies will send you a final warning before escalating your case out of In-House Collections. 

After being educated on the benefits of paying back your loan on time or keeping your lender notified so you can arrange payments.  

If you decide not to pay your loan, you will no longer be able to borrow with this type of record and will be responsible for all legal fees. In addition, your credit will become affected and may prevent you from getting other loans, such as a mortgage, a car loan, or other financial situations that would require a good credit rating.  

Financial Knowledge is Power! 

Repaying your payday loan on time is crucial. Late fees and penalties can quickly add up, making the loan more expensive and potentially trapping you in a cycle of debt.  

Long story short—payday loans are a wonderful option for you and your family if you need some quick cash for the expected events. We all know that life just doesn’t always wait until payday. However, we hope this blog keeps you honestly informed of the consequences that would follow by not following the legal contract you signed. 

At Speedy Cash, we hope to build a long-lasting positive relationship with you. We understand that financial challenges can arise. Please keep us informed of your financial situation, and we will work with you to ensure we can get everything fair, for both of us!  

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