What Happens if You Owe a Payday Loan?


Being in debt is a frustrating and scary experience. When you don’t have the funds to pay off your debts, it can feel like you have no alternatives and nowhere to turn for help. Payday loans can quickly spiral out of control due to the high-interest rates. Even a payday loan as small as $400 can turn unmanageable if you don’t pay it back in time.

Easy payday loans are tremendously helpful when you need to turn around your financial situation. However, you need a plan to pay them back quickly. When you’re trying to manage multiple debts at once, it’s easy for interest payments and late fees to overwhelm you quickly. Being in debt can get complicated, and it’s important to remember that there isn’t a clear-cut answer for every situation.

Here’s what to expect and what happens if you owe a payday loan:

1. You’ll Be Charged Interest

One of the worst parts of having an outstanding debt is that interest begins to accrue immediately. On top of the interest on the balance owing, you’ll also have to pay late fees that start once you miss your first due date. Between late fees and interest, your debt can get out of control pretty fast.

While this can be all overwhelming, remember that the longer you wait to deal with the outstanding debt, the more interest you’ll be charged. Being proactive when dealing with debts is the best course of action.

2. You’ll Receive Collection Calls

When you owe a payday loan, you’ll have annoying calls from collection agency. If your debt is really past due, the company you have the debt with will send your file to a collections office that will pursue the payment of the debt. The collection agency will then call any and every number they have on file for you. While these calls are annoying, you can deal with them by letting the agency know your plans for repaying the loan.

Collection agencies will usually ask you to make a small payment at first to show your commitment to paying down your debt. Talking with the collection agency can also help you discover if you have any options or flexibility in regards to paying off your debt.

3. Your Credit Will Take A Hit

The presence of a delinquent account will quickly harm your credit rating. Your credit score is a rating between 300 – 850 that gives an overall picture of your trustworthiness and reliability. Having a high credit score is the result of paying debts back on debt and using debt in a smart way that slowly builds your credit reputation.

Your payment history is an important factor that counts for a significant portion of your credit score. This is why paying your debts down quickly is a good idea, as the alternative is to have bad accounts stay on your credit report for years.

4. You Won’t Go To Jail

Once people start getting lots of collection calls, they may start to worry about the chance of going to jail. While failing to repay a loan is illegal, many steps happen before court and jail are involved. In most cases, a lender would have to go far out of their way to escalate your case to be worthy of jail time.

Again, this is why it’s worth dealing with your debts as early as possible. Even if you’re unable to pay, if the lender is aware of your situation and your plans, you won’t receive threatening phone calls or letters.

5. You May Have To Go To Court

If your debt is really old, you may be summoned to appear in court. Collection agencies will send you a court summons, even if it’s for a small amount. Again, this is usually due to no communication between the lender and the person in debt. In these situations, the lenders usually win because the customer doesn’t show up in court out of fear.

This is what happens when you owe a payday loan and where situations that involve garnishing wages start to develop. Taking action on your debts and getting them resolved as soon as possible is the best course of action to avoid dealing with the negative outcomes of debt.

6. You’ll Have A Chance To Negotiate

Being in debt and getting collection calls is a stressful experience. However, it’s important to remember you still have options even during these tough times. If you speak to the lender or the collection agency, they’ll share some information with you on how you’ll benefit from paying back your loan. Some debts can be negotiated and settled, while you must pay others (like debts to Government services) in full.

You can work with the collection agency to better understand your debt and make a plan moving forward. Although dealing with your debt is a frustrating experience, it’s much better than having your wages garnished or having to appear in court over your debt.