Payday loans come with exorbitant interest rates and fees that often make it very difficult to repay them. If you can't repay a payday loan, the account may be sent to a collection agency, damaging your credit. Default on a payday loan can result in bank overdraft fees, collection calls, damage to your credit score, a day in court, and a garnishment of your paycheck. There is a possibility that the collection company will take you to court.
It can result in garnishments against your property or garnishment of wages. At some point, the payday lender might send your debt to collections. In the end, you may owe the amount you borrowed, plus the fee, overdraft fees, returned check fee, potential collection fees, and potential court costs if sued by the payday lender or collection agency. No, you can't be arrested for not paying a payday loan.
However, if you are being sued or a court judgment was entered against you and you ignore a court order to appear, a judge can issue an arrest warrant against you. While each situation can have some differences, there are some typical consequences when you don't pay a payday loan on time. Paycheck prepayment apps like Chime, Earnin, and MoneyLion are another way users can borrow a percentage of their expected earnings for a small fee and pay it back on their next payday. Any negative checking account balance can also be transferred to an independent collection agency, leading to two separate collection accounts resulting from a single payday loan default.
In recent years, “payday loans have become increasingly popular in the United States, including in the state of Texas. It is illegal for a payday lender to threaten to put you in jail or criminally prosecute you for an unpaid debt. Along with your application, a payday lender will usually ask for identification and evidence of your income, such as a driver's license and a paystub. If you think a payday lender harassed you while you were trying to collect your loan, contact DFI to file a complaint.
Depending on the lender on your payday loan and when you receive your payment, repayment can take anywhere from two to four weeks. If you can't repay a payday loan, you could pay off the debt for less than you owe or file for bankruptcy if your debts are overwhelming. If you think these payday lenders are the lowest of the lowest, wait until you start hearing from the mercenaries they hired to try to cash you out after they haven't received money from you in about 60 days. Often, a borrower does not have the funds to repay the loan when it matures, so the loan is renewed and another large portion of interest is added to the debt.
Both circumstances give you the leverage needed to pay off the payday loan debt for a fraction of the outstanding balance. Your loan will be sent to you via this method and will be deducted from your account on the next payday with this method as well. If you apply for a payday loan for an emergency, do your best to return it on time and avoid renewing it. Next, you'll have to deal with a collection agency whose collection efforts may be more aggressive than those of the original payday lender.
Some states have laws requiring payday lenders to grant extended repayment plans to borrowers if requested to do so.