When applying for a payday loan for emergency cash, most applicants don’t foresee future payment problems. Many apply with the intentions of paying back their lender in full in about two weeks. But things don’t always go according to plan. If you find yourself unable to repay your payday loan, panic may take over. However, the majority of payday lenders are extremely negotiable and willing to help you through financial problems. But at the same time, they will take action if you blatantly refuse to repay your debt.
Here are three actions a payday lender can take if you do not repay your balance.
Charge additional interest.
Don’t repay your payday loan by its due date, and you can expect your payday lender to tack on additional interest. Interest will continue to incur until you settle your balance. The longer it takes to repay your debt, the more you’ll owe. Dragging out a payday loan can create a serious financial burden, in which your original debt snowballs into a much larger amount.
Refer your account to a collection agency.
Depending on the payday lender, they may have a working relationship with a collection agency. If you ignore correspondences or calls from the payday lender, there’s a good chance that the lender will refer your account information to the collection agency. The agency may leave messages on your house phone, send letters or seek legal recourse. If you do not settle your balance, a collection account can appear on your credit report, which can lower your credit score.
Pursue a lawsuit.
Some payday lenders do not refer accounts to collection agencies, but rather sue borrowers for repayment. This is after they’ve exhausted all collection attempts. A lawsuit can result in a credit judgment, and some payday lenders go as far as requesting a lien on a borrower’s bank account. But the financial problems don’t stop here. In addition to owing a creditor the original balance plus additional interest, creditors may seek compensation for their legal expenses. In many cases, the judge overseeing the case grants this request.
Understand, however, that while payday lenders have the right to pursue a collection or lawsuit, they cannot make physical or verbal threats, nor can they harass debtors or discuss their debt with other people. If a payday loan lender violates your rights, complain to your state’s attorney general’s office or the Federal Trade Commission.