Can I Go To Prison If I Don’t Repay My Loan?

Author · Modified on 24 February, 2022

It is extremely rare for a borrower to be sent to prison for not repaying their payday loan and categorically will not happen.

However, you are likely to experience late fees or penalties, receive a negative impact to your credit rating and other things like follow-up calls and letters from the lenders who are trying to recover their loss of funds.

In extreme cases, a lender may take you to court over unpaid loans, but rest assured, this is something they would prefer to avoid and would rather settle a debt without involving the courts.


Key Points:


  • In the US, not paying your debt is highly unlikely to land you in prison.
  • In fact, you are more likely to end up in prison for not turning up to a court date.
  • If you can’t repay your loan, you can rollover you debt, which 25% of borrowers do.
  • You can talk to your lender about altering your repayment plan.
  • By failing to repay your loan, your credit score could be damaged, making future borrowing more difficult.


It is extremely rare for a borrower to be sent to prison for not repaying their payday loan.


What Will Happen If I Can’t Repay My Loan?


It Will Negatively Affect Your Credit Score


The first thing to know is that if you are not able to repay your payday loan this will affect your credit score negatively. Being unable to repay your loan will affect your credit score, meaning you will be less likely to be able to borrow money in the future.


How Will The Lender Try To Get Their Money Back?


Defaulting on your payday loan can drain your bank account, trigger wage garnishment, collection calls and lawsuits. Wherever possible you should settle your debt before any of this happens.

Once the agreed loan period has passed the lender who you borrowed from will continue to seek any unpaid amount on your loan. This will happen as the lender sets up automatic withdrawals from your account, attempting to regain as much for their loan as possible. This can result in bank fees for you.

Your lender may set up wage garnishment, which involves a part of your paycheck being withheld, and going directly to the lender to repay your loan.


Could I Be Taken To Court Over An Unpaid Loan?


Although you will not go to jail for failing to pay back a loan, lenders often take clients to court, to claim back the money they have lost.

In most cases, payday lenders will try to get their funds back through means that are beneficial to both parties. If for whatever reason this cannot be easily achieved, a lender may decide to secure their funds by taking you to court. A judgement order will be made against you in the court if you don’t dispute the lender’s claim, or if they win regardless.

If you are summoned to court, you must show up! A lot of the time, lenders automatically win cases as the defendant fails to show up.


Can Any Kind Of Unpaid Debt Lead To Jail Time?


While you won’t go to prison for failing to repay a payday loan, there are other types of debt where could could run the risk of jail time.

With other forms of debt, there is the possibility that failing to meet repayments will land you in prison. These include:

  • Criminal fines.
  • Council taxes.
  • Business rates.
  • Child maintenance.

As is the case with payday loans or installment loans, it’s vital to make sure you keep on top of any and all payments required from you, as failure to do so could end up in expensive penalties, or, for those payments listed above – prison.


While you won’t go to prison for failing to repay a payday loan, there are other types of debt which could run the risk of jail time.


What Should I Do If I Can’t Repay My Loan?


The first thing you should do is speak to your lender, because being silent or ignoring their messages and calls won’t help.

By avoiding any correspondence, you are inviting the lender to take even further measures to get some kind of response from you. If you can explain that you are struggling to make payment, you may be able to commit to paying off lower amounts for longer, known as a pay plan or an arrangement.

The US lenders are regulated and will need to follow procedures and there are efficient ways to help people who are struggling to repay.

Beyond this, you may wish to seek advice from a nonprofit credit counselor, bankruptcy attorney, or legal aid center to find out more about your options and plan for a better and brighter financial future.

Was this helpful?

Thanks for your feedback!
Scroll to Top