What to expect if you fail to repay your payday loan?
Before applying for payday loans online it is necessary to get acquainted with all terms and conditions. One of the most important things to keep in mind is the repayment terms and consequences, which may follow in case you don’t pay the loan back on the due date that was agreed in the payday loan contract.
There is a list of stages, which you should expect if you miss your repayment date:
- Your debt may be sold to the collection agency: in case you fail to pay the payday loan back and don’t find any alternate solution to this problem, for example, arrange a new repayment plan, you may expect that your lender will inform the collection agency, which in its turn will share this information with the main credit bureaus. It is better to make the repayment on time to avoid any contacts with the collection agencies as they are known for using aggressive methods to get the money you borrowed back. They may call your relatives and colleagues and try to make them pay your debt.
- Your credit score will take a hit: If you haven’t repaid your payday loan on time, your credit score may be damaged. Poor credit rating will lead to problems with getting an approval for credits as you will be considered to be a risky borrower.
- You may find yourself sued in the civil court: Your payday loan lender has the right to start the court judgement against you in case of not getting the loan repayment. The court may take the decision to allow the lender to get an amount of the loan borrowed with the help of selling your property to cover the debt. However, good news is that non-repayment is not considered to be a criminal action and you won’t be sent to prison for not meeting the loan agreement requirements.
- You will pay high additional interest rates and fees: the longer you don’t pay money back, the higher rate of fees you will have to pay back. As the payday loan’s annual percentage rate may be up to %300 and higher, the nonpayment may result in a very large sum of money, which may be much larger than the amount of a payday loan you had borrowed. According to the legislation of some states, the lender can’t charge you more than the certain amount of interest rate. However, restrictions refer not to all states and sometimes it is up to the lender to decide which fees you are going to pay in case of missing the repayment.
How to deal with the nonpayment consequences?
First of all, it is recommended to study how the system of payday loans work in order to know all even the smallest details. Keep in mind that payday loans are emergency loans aimed at solving only urgent problems, which can’t wait till your payday. In case you understand that you have tight budget and the loan repayment will hurt it, you should immediately inform your payday loan lender in order to arrange a new repayment plan.
Some states allow using the extension and rollover options in case you can’t pay your loan back on time. However, some states are against using such practices as they include extra fees. In any case, you should pay your loan off as soon as possible using the most suitable method.