What Happens If I Cannot Repay My Payday Loan?

Author · Modified on 16 January, 2022

If you cannot repay your payday loan, the main implications can include:

  • follow-up correspondence from your lender such as calls and emails
  • additional fees
  • added interest
  • a negative impact on your credit score,
  • more difficult to get credit elsewhere in the future.

It can be incredibly stressful if you find yourself in the unfortunate situation of being unable to meet your repayment schedule for an online payday loan. Here, we’ve covered the details of what you should do in a situation like this and laid out what will happen if you fail to repay your payday loan.


Key Points:


  • Repaying your debts is essential to maintaining a strong credit score.
  • Failing to repay your debts can lead to late fees, damage to your credit record, and threatened legal action. If you have declared collateral in your contract, you could lose assets.
  • Only 14% of borrowers can easily and promptly pay back their loans.
  • If you are struggling to repay your loan, contact your lender and try to arrange an adjusted repayment plan.
  • You could also seek an additional loan, or approach friends or family for temporary support.
  • You should only take out a loan if you have in mind how you will repay it.


Your lender will try to find an arrangement that makes it possible for you to repay the loan.


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


If you realize you will be unable to meet a scheduled payday loan repayment, you should make sure to contact your lender immediately. Your lender will try to find an arrangement that makes it possible for you to repay the loan. You may be able to agree to a payment schedule that would be more affordable.

Additionally, you could approach friends or family for some money to help you in the short term, before you get back on your feet. While this may seem stressful, family and friend loans won’t negatively impact your credit score in the way that missing loan repayments will.

You should never take out more money in the first place that you know that you will be able to afford to pay back when the repayment is due. Note that a payday loan should only be used a short-term fix for an unexpected bill, or just to tide you over before the next payday.

Being unable to repay a loan can be an incredibly stressful situation. If you still need to pay rent and put food on the table for your family that has to come first. In situations like this, it is advisable to seek advice from a nonprofit credit counsellor, bankruptcy attorney or legal aid centre about your next moves.

If you are unable to repay your loans, there is the possibility of claiming bankruptcy. Claiming bankruptcy is something that should be talked over with a professional and will only be appropriate in certain situations.


Will My Lender Help Me?


Remember, lenders are there to help you in the first place. You should also remember that lenders are keen on receiving your repayments as smoothly as possible. Given this, many lenders will offer an alternative repayment plan if you run into trouble. They may offer you more time or lower interest to help you, which helps them. The first and best step is to try and speak to them!


What Will A Lender Do If I Can’t Repay My Loan?


If you can’t repay your payday loan, there are several actions that your payday lender may take.

Typically, payday lenders enforce wage garnishment, lawsuits, and debt collection. For a long outstanding debt, you may be given a court summon as an attempt to recover the money, but you can be rest assured that you will not face prison for not repaying your loan.

After the agreed-upon loan period has ended, the lender may implement one or more of these actions to obtain any unpaid funds. They are also able to instigate automatic withdrawals from your bank account, which could result in bank fees for yourself.

If this proves to be unsuccessful, they could set up wage garnishment. This would involve a portion of your wages being withheld and then sent directly to your lender.




Could I Go To Court If I Don’t Repay My Loan?


Although a lender will always try and create an alternative payment method for you to repay your loan, if a client is unwilling to co-operate with the lender, it is possible for a payday lender to take you to court over your unpaid loan.

However, it is important to note that this will always be a last resort and in the vast majority of cases the court does not need to be involved.

If you are summoned to court, make sure that you show up! Never ignore the lawsuit and turn up in court when you have been asked to do so. In many cases, lenders automatically win cases, because clients do not attend court. No matter your circumstances, it is always in your best interest to show up to a court date.


Could I Go To Prison For Not Repaying My Loan?


In most cases, you do not need to worry about going to prison for failing to repay a loan. In the stressful situation of failing to make a payday loan repayment, you may begin to spiral and become scared that you may face jail time. In the vast majority of cases, this is absolutely not the case.

A lender will always work with you to ensure you can repay your loan in the best way for you.

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