The Pachyy Editorial Team comprises a diverse and experienced team of writers, researchers and subject matter experts whose aim is to provide you with useful insights, guidance and commentary on all matters related to your personal finances.
Hey there! We want to help you understand payday loans better. Just like any other loan, a payday loan is a legally binding agreement, which means that you are expected to repay the money you borrow, as long as you can reasonably do so. However, we understand that there may be situations where it becomes difficult for you to repay your payday loans, especially if you have a lot of other debts that you are struggling to manage.
What to Expect if I Can’t Make Payments on My Payday Loans?
If you find yourself unable to make your payments on your payday loans and can’t communicate with your lender, here’s what you can expect. Defaulting on your payday loan can lead to various consequences such as depleting your bank account, facing wage garnishment, receiving collection calls, and even being sued. It’s important to make every effort to keep up with your repayments to avoid these potential outcomes.
Once the agreed loan period has expired, the lender you borrowed from will continue to pursue any unpaid amount on your loan. They will set up automatic withdrawals from your account in an attempt to recover as much as possible. However, please note that this can result in additional bank fees for you. If these attempts are unsuccessful, your lender may escalate to collection calls. In some cases, they may even visit you in person to try to collect the debt.
If these measures still prove ineffective, your lender may resort to wage garnishment. This means a portion of your paycheck will be withheld and directly sent to the lender as repayment for your loan.
It’s important to remember that even during the period when your loan remains unpaid, interest will continue to accrue.
What to do if you’re unable to repay your payday loan debt?
If you find yourself unable to pay off your loan, the first step is to reach out to your lender. In most cases, your lender will be understanding and willing to work out a new payment plan that suits your situation. Their goal is to help you repay your loan without added financial stress. So, it’s important to contact them as soon as you start having difficulties.
If repaying your loans becomes impossible, there may be the option of claiming bankruptcy. However, it’s crucial to discuss this with a professional who can assess your specific circumstances and advise if it’s the right choice for you.
We understand that not being able to repay a loan can be extremely stressful. Your top priority should be ensuring you have a roof over your head and food on the table for your family. In these situations, it’s recommended to seek guidance from a nonprofit credit counselor, a bankruptcy attorney, or a legal aid center. They can provide valuable advice on your next steps and help you navigate through this challenging time.
Is it Possible to File for Bankruptcy if I’m Unable to Repay a Payday Loan?
If you find yourself unable to repay your payday loan, there is an option to file for bankruptcy. However, it’s important to note that filing for bankruptcy can have long-term consequences, such as difficulty obtaining loans in the future.
An alternative to bankruptcy is an Individual Voluntary Agreement (IVA). This is an agreement made between you and your lender, where the interest on your loan is frozen in order to reduce the overall amount you owe. While an IVA can still have a negative impact on your credit score, it is generally considered less stigmatizing than bankruptcy. Additionally, an IVA can be kept private, unlike bankruptcy which is a public announcement.
Will I Face Legal Action for Not Repaying a Payday Loan?
If you’re having difficulties repaying a payday loan, it’s possible for the lender to take you to court. However, this is always a last resort and most often, court involvement is not necessary.
Court cases don’t always involve hefty amounts of money. It’s quite common for lenders to pursue legal action for even small unpaid loans. Therefore, don’t be surprised if you receive a lawsuit over an unpaid payday loan.
The key here is to maintain open communication with your lender. As long as you continue to communicate openly, there is no reason for your case to escalate to court.