Failure to pay a payday loan can result in overdraft fees, collection calls, and damage to your credit score, spending a day in court, as well as garnishment of your paycheck. Not being able to repay a payday loan would allow you to pay off the debt for less than you owe, or declare bankruptcy when your debts are overwhelming. Payday loans are intended to cover a cash shortage through the next payment or over a limited period of time.
Remember to avoid spending them on current expenses such as rent, groceries, or utility bills. You may get into serious economic problems by using them in this manner. So here’s all you can expect.
Extra fees and interest
Based on the location of your home as well as the provider of your loan, you may incur extra fees when you fail to repay your payday loan. These charges are called non-sufficient funds (NSF) fees and are charged when you have insufficient money to pay for a transaction. The majority of payday loan providers would instantly hit you with a delayed payment fee if they are unable to collect the payment on the expiration date. You will also be charged interest on the loan, in many cases at around 1% per day.
The payday lender will forward your case to a collection agency
In the event that you have not made a payment or repayment plan in a specified amount of time, which is usually two months, the payday lender will forward your case to a collection agency. The process may be very inconvenient since you will probably start getting letters, phone calls, as well as door-to-door visits to ask for the money. By the time you reach this stage, have a sit and figure out the amount you can pay and its frequency.
Have a discussion about this with your debt collector. They will pay the collector and the collector will give the funds to the payday lender. However, now you have an option to get an online payday loan as an alternative.
Be aware that even if you are late on a small amount, there is still a possibility you could be taken to court by a debt collector. This may result in a lien on your belongings or even a wage garnishment, which can vary from country to country. A judge, in that case, will be able to make an order for you to directly pay the lender or to give up a personal property instead of making the payment.
The judge could even authorize the lender to garnish your wages by taking a portion of your paycheck directly to pay off the debt. Keep in mind though that the majority of lenders would like to escape the hassle and cost of going to court nearly in the same way that you would. Therefore, a payment plan is something they would like to work out with you prior to arriving at that payment stage.
You may even request the payday lender to make a compensation payment or you may ask for an installment repayment plan to enable you to pay off the loan in more reasonable sums and avoid the high interest charges.