What Happens If You Dont Pay Payday Loans

What Happens If You Dont Pay Payday Loans – Written by Alison Martin Alison Martin Arrow Legal Specialist, Personal Finance Alison Martin is a specialist in personal finance, mortgages, car loans and small business loans. Martin’s career began 10 years ago as a digital content strategist and has since been published in many leading magazines, including The Wall Street Journal, MSN Money, MoneyTox News, Investopedia, Experian and Credit.com. As a Certified Financial Education Educator (CFE), Martin shares his passion for financial literacy and entrepreneurship through interactive workshops and programs. LinkedIn Connect with Alison Martin on LinkedIn Alison Martin

Edited by Aylea Wilkins Arrow Right Editor, Student Loans Aylea Wilkins is the editor-in-chief of Student Loans. Previously, he dealt with personal and capital loans and edited content on motor, home and life insurance. He has been a professional editor for almost a decade, focusing on helping people make confident financial and purchasing decisions by providing clear and unbiased information. Connect with Aylea Wilkins on LinkedIn. Aylea Wilkins on LinkedIn

What Happens If You Dont Pay Payday Loans

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Many times, people get payday loans because they can’t get quick cash anywhere else. Unfortunately, if the borrower is unable to repay the loan, the financial situation may deteriorate.

Depending on how much time has passed since you received the loan, the lender may threaten to file a lawsuit against you and garnish your wages. Borrowers have options to help in this situation.

While each situation may vary, there are some common consequences for failing to repay a payday loan on time.

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Most lenders will repeatedly try to withdraw money from your bank account, in accordance with the terms of the loan agreement. If your bank declines the transaction due to insufficient funds, the lender may begin withdrawing funds in smaller amounts.

Even if the lender collects part of your balance using this method, you may still face financial problems if other banking transactions are declined. Plus, bank fees can add up, costing you hundreds of dollars in the blink of an eye.

As the creditor continually tries to charge your account, you can expect collection actions to be taken, including repeated phone calls and letters demanding payment. The creditor may sell your debt to a collection agency or hire a lawyer to recover the amount owed.

You can suspend debt collection activities by requesting an extension of the deadline from the debtor. Select states have laws that require payday lenders to offer borrowers an extended repayment plan upon request. Keep in mind that these extensions often come with additional fees and interest.

All You Need To Know About Payday Loans

The creditor may report the arrears to the credit bureaus after submitting it to a debt collection agency. Your credit score may drop slightly and a negative mark will remain on your credit report for up to seven years. Therefore, securing competitive financing offers may be a challenge for you in the future.

Once your payday loan closes, you can take steps to rebuild your credit score. First, check your credit report to identify delinquent accounts and payment history, as they are the largest component of your credit score. They want to spot mistakes and question them immediately.

Adjust your spending plan to free up money that you can use to pay off credit card debt in the near future. You’ll want to do this to lower your credit utilization ratio, or the amount of revolving credit you’re using, since it makes up 30 percent of your credit score.

Most importantly, monitor your credit report and practice responsible debt management practices to give yourself the best chance of improving your credit score over time.

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For a creditor, debt collection is much cheaper than taking you to court, and selling your account to a debt collector for pennies on the dollar means that the creditor will only receive a small percentage of the amount owed.

Both cases allow you to repay part of the payday loan for part of the remaining balance. Offer an amount you can afford to pay in one lump sum, and mention your willingness to file for bankruptcy if the creditor refuses to file for bankruptcy. The creditor may want to negotiate with you because bankruptcy means they may not be able to collect the debt.

If a creditor takes you to court, they have the burden of proving that you owe the debt. Ask them to provide the documents or contract they signed when taking out the loan. If the debt collector does not provide this information, the judge will dismiss the case. However, if a creditor proves that you owe the debt and you receive a court judgment, you may be required to pay or garnish your wages.

Quick reminder: If a creditor is threatening to put you in jail, contact your attorney general’s office immediately to file a complaint.

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Instead of ignoring a delinquent payday loan and destroying your credit, consider the following loan repayment options:

You can try talking to friends and family or finding ways to adjust your finances to cover your expenses, such as temporarily canceling your streaming subscription or switching to a lower food budget.

If defaulting on a payday loan has had a major impact on your credit score, it may be possible to get it back on track. The following strategies can help restore your credit health:

Most importantly, keep your credit score in check by regularly monitoring your scores and reports. If you notice any errors, file a dispute with the credit bureaus to remove incorrect information that is lowering your credit score.

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Alison Martin is a payer specializing in personal finance, home loans, car loans and small business loans. Martin’s career began 10 years ago

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