Payday loans have been proven to be great for people throughout the world, yet, not many people are aware of the consequences that they can face in case they are unable to pay back their loans in time. With this in mind, in this article, we will focus on learning what the actual consequences are, alongside with learning how to deal with them, in case you are even placed in the situation of being unable to pay back your payday loan.
To kick things off, it is important to learn the consequences of not paying back your payday loan on time, or at all.
In case you decide to default your loan, and do not manage to arrange an alternate payment method with the agency, then you should expect your credit score to take a considerably hit. Not only this, but when a borrower decided to default, chances are that the lender will go ahead and sell the debt to a collection agency, which will then go ahead and report the unpaid loan to a couple of bureaus, based on your jurisdictional area.
What should I expect from collection agencies?
Most people are truly afraid of collection agencies due to the horror stories they hear. However, in today’s world, there is a legislative framework, which means that they also have to follow a set of laws, and cannot freely roam around your property, or call threats. However, you can expect debt collection agencies to go ahead and call you both at home and work, and in some cases, you can even expect them to get in touch with your friends and family, and ask them to pay back the loan. This often represents the first step of trying to get the debt back. If this does not succeed, then chances are that you will be sued in civil court.
Being sued in civil court
In case you default on paying back a loan, the lender also has the option of initiating a court appeal towards you, in order to collect the amount that is overdue alongside with the afferent taxes. Once the payday loan agency has managed to obtain a judgement against you, they may be able to seize your property and then proceed to sell it in order to pay back the balance of the loan. Debt judgements are quite dangerous, as they can be satisfied by selling most types of properties that you already own, or later decide to acquire. The period of time for your judgement tends to depend based on where you live, but in the UK, it usually lasts for a couple of years.
Do keep in mind that failing to pay back your debt does not represent a crime, so you likely won’t face any jail time for this. However, you can expect to lose some of your property, but also significantly worsen your credit score.
Upon being sued, or being threatened, it is best to hire a lawyer that will proceed to help you get rid of the threats and keep your property. However, in most cases, the best option would be to work harder for a specific period of time and pay back the loan that you have initially signed for. This will get you rid of quite a lot of headache, while also saving you time and valuable resources.
Expect to pay higher interest fees if you’re late with your payment
As payday loan agencies do not check your credit score, they also often use higher taxes, to make sure that borrowers pay back their debt on time. Based on this, being late and failing to negotiate with the agency can lead to higher taxes and interest fees, so you can easily find yourself owing a few more hundred pounds for a smaller loan that you took a few months ago, if not paid back on time.
Dealing with the issue
If you know that you won’t be able to payback your loan on time, then you might want to call the payday loan agency as soon as possible, and let them know about the issues that you’re dealing with. If your problems convince them, then chances are that you will be given a few extra days or weeks, during which you can pay back your loan. Interest fees may also be smaller, depending on the payday loan agency that you choose.
However, your best bet is to try your best to pay off the debt as soon as possible, as dealing with it in court can be a pain for both the lender and the borrower, and can lead to other issues later down the road, especially if you will find yourself requiring a loan in the future.