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No, you cannot go to prison over an unpaid payday loan. However, if you are unable to pay your payday loan you could incur added fees, damage to your credit score, it may be harder to get access to credit in the future and you may in some cases go to court. But if you went to borrow $500 and were unable to pay this back, there is no reason why you will end up in prison as a result.


Key Points

  • If you are unable to repay your payday loan, you can talk to your lender to discuss your options
  • Your lender may be able to offer you a longer term arrangement to help pay off your debts
  • If you have a large debt outstanding, it is possible to go to court over unpaid loans
  • You should always take court notice seriously as sometimes lenders win by default due to borrowers not appearing on the court date


What happens if I cannot pay my payday loan?

If you are unable to repay your payday loan you should always talk to your payday loans company directly to try and work out a new repayment plan. This may include a rollover although note that this may incur additional fees and will lead to increased interest.

On the off chance that you are unable to work out a new payment plan, the payday lender could add late fees and other charges to your loan, continue to charge interest, and could contact a collection agency which will negatively impact your credit score.

Before taking out a payday loan, you should always assure that you will be able to repay the loan. Payday loans should never be used as a means of fixing long-term financial trouble. If used incorrectly, they can very quickly worsen your financial situation.

If you are unable to repay your payday loan, this will have a negative impact on your credit score and subsequently affect future loan approval or borrowing power.

Defaulting your payday loan payments can lead to zero funds in your bank account, collection calls and lawsuits; however, before getting to this point, it is always advisable to try and settle the debts before they escalate.

At the end of your agreed loan term, the lender will continue to seek any outstanding debt on your loan. This can lead to bank fees for you, especially if the bank account is empty.


Will I be taken to court if I cannot repay my payday loan?

Although it is unlikely that you will go to prison for not repaying a loan, it is more common for lenders to have to take clients to court in an attempt to reclaim their lost money. This is true even for small amounts of money – and this is only when all other methods such as phone calls, emails, letters and even bailiffs have not been successful.

It is possible that your payday lender sets up wage garnishment; this is where a portion of your paycheck is withheld and sent directly to the lender to repay your loan.

The longer you are unable to pay your loan, the worse the financial situation as interest will continue to accrue throughout the entire loan term. Thus, you should always try to pay back your loan within the agreed time period to avoid interest fees soon spiralling out of control.



If you are unable to repay your payday loan, you will not be taken to prison but may be taken to civil court.


Can I go to prison for any other type of debt?

For other types of debt, there are examples of prison as a punishment for not being able to repay. These include council tax, criminal fines, child maintenance arrears owed to the CSA, tax evasion and business rates.

Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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