What happens when you don’t pay back a payday loan?
Have you ever wondered what happens when you don’t payback 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!
Let’s start with the main question: what is a payday loan? A payday loan is a short-term loan for those in need of cash before payday. Benefits of payday loans are that they are quick, and payday loan companies typically don’t require any credit checks. This is great for anyone who may have less than awesome credit standing, or those who need cash quickly for something going on in their lives. On the other hand, there are many misconceptions surrounding payday loans. Many people are under the wrongful impression that because payday loan companies do not require a credit check for a loan, a payday loan cannot affect your credit. This is actually not the case. The reality is that payday loans are similar to bank loans in a lot of ways, such as; if you default on your payment, you are charged interest; if you miss a lot of payments, or refuse to make arrangements, eventually, it will affect your credit.
You might ask yourself, what do I need to know? Let’s start with the basics! Your loan must be paid back on your next payday. This means that many payday loan payback dates are different; they are dependent on your pay/income frequency. If you are paid bi-weekly, you are expected to payback your loan in full within two weeks. If you are paid monthly, you are expected to payback your loan in full within the month. However, no matter what pay frequency you receive your income on, in short, the loan must be paid back by your next payday.
Now, let’s get into the question of the day… what happens when you can’t payback your payday loan on time? Well, if you are unable to payback your loan, the best thing you can do is call ahead to the company you borrowed from, so you can make payment arrangements. Although, 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! Would you wait to see the doctor if you broke a bone? We hope not! The same goes for informing your lender of any financial troubles you may be experiencing, that would go against the contract you signed. By doing this, it allows the lender to try and work with you to pay back the money they lent you. 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 with a plan to payback your loan. Let’s be real here for a moment — the money you borrowed was not yours to begin with; you borrowed it. So, you must remember that it is your obligation to pay it back. Lenders are happy to work out arrangements so that everyone ends off in a good place. In fact, some lenders may extend your due date, while some may allow you to make multiple payments. Whatever it may be, the results will be better than defaulting on your loan and ignoring it.
What happens when you refuse to payback your loan? Before we get into the negatives, it is important to remember what we covered in the last paragraph. Talking with your lender can result in agreements to help you through your situation. But, if you refuse to payback your payday loan, the first thing that will happen is your loan will be moved to Collections, where lenders will do what they can to recover their funds. Remember, the money you borrowed is theirs and not yours; they lent it to you. This means lenders have every right to seek their money back from you. 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. So you can easily see, refusing to payback your loan is causing more problems for you than if you were to remain in contact, and keep your lender updated with your situation. If to no avail, most companies will send you a final warning that your file will be moved out of In-House Collections and escalated higher.
What happens from here? After being educated on the benefits of paying back your loan on time, or, keeping your lender notified so you can arrange payments, hopefully you won’t find yourself in this pickle. If you do, your situation will be escalated to the legal system. You will no longer be able to borrow with this type of record, and you will be responsible for all legal fees. In addition to this, your credit can become severely damaged, and this may restrict you from other things in life such as getting a mortgage, a car loan, or other financial situations that would require a good credit rating.
Long story short – payday loans can be a wonderful option for your and your family if you need some quick cash for the expected things that happen in life. 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. Please keep us informed with your fiancnail situation, and we will work with you to ensure we can get everything squared away, for both of us!
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