It is unlikely that a payday loans company will sue you if you are unable to repay your loan. The average loan is around $300 or $500, so the cost of suing a customer is not always going to be worth it. If you cannot repay your loan, the lender will use a number of legal methods to recover their losses, including phone calls, emails, text messages, letters and sometimes bailiffs. However, if these methods are not successful, they may look to take court action to bring your case to a close. This does not necessarily mean suing you for a lump sum or free – this may just involve the debts you owe and some court fees.
Key Points
- If you’re unable to repay your payday loan, you will probably not be sued, but you may go to court if the loan is very overdue for a long period of time and no other payments or contact has been made
- If you don’t pay your loan, your credit score can be negatively impacted
- You will always be contact by email, phone call and letters but if you do not respond or repay anything for a long time, there is a chance that the lender will take you to court to reclaim the money that they are owed.
Can Payday Lenders Sue Me?
It is possible. An online payday lender can and will take you to court and if they are successful you will have to repay however much money the court states. Before going to court the lender will always look for a way that works for both parties. If a resolution cannot be found, there is a possibility that they will take you to court. This is normally a lender’s last resort as it is expensive, time-consuming, and is not always successful for the lender.
If you don’t repay your payday loan, a number of things could happen which includes a negative impact on your credit score (decreasing the likelihood of borrowing money in the future) wage garnishment, and as a last resort debt collectors. However, jail is a last resort and is unlikely to happen.
What Happens if I Get a Court Summons?
Making you appear in court will always be a lender’s last option and wherever they can they will try to make an arrangement for repayments to be made that work for both parties. This could be a rollover where you pay some of the debt in a separate month or working out a plan that works for you. However, if you stop cooperating with the lender or you’re unable to repay your loan, your lender might request you go to court.
Some people believe that a lender won’t take you to court for a small amount, but this is a myth. You shouldn’t be surprised if you’re taken to court over a relatively small amount of money. This happens regularly as a lender needs to get their money back for the majority of the cases that they work with.
If a lender does take you to court, it’s important that you show up for the hearing. You should never ignore a lawsuit that is presented to you. If you don’t show up to the court case then a lender automatically wins. Even if it’s stressful, you should always attend a court hearing.
What Could Happen if I Don’t Repay My Loan?
If you default on your payday loan, the lender can send your case to a debt collector, start a lawsuit, garnish your wages, or even drain your bank account. After your loan period has passed your lender will continue to seek out any unpaid amount that is outstanding.
The lender will want their money back and so can set up automatic withdrawals from your bank account to try and recoup as much of their loan as possible. This can result in bank fees for you if they have to set up an automatic repayment. If they’re unable to set up automatic repayments, they might look to set up wage garnishment, which means that part of your paycheck will be withheld to repay your loan. This amount will go directly to the lender.
Every month that you don’t repay your loan it will accrue interest.
What Happens if I Can’t Repay My Payday Loan?
It can be incredibly stressful if you cannot repay your loan. If you are struggling to choose between repaying your loan, paying rent, and putting food on the table for your family, it can be a very difficult choice. If you’re put in this position, it’s advisable to get advice from a non-profit counselor, credit, bankruptcy attorney, or legal aid center about what your options are.
If you really cannot repair your loan, there is an option to file for bankruptcy. Claiming bankruptcy is something that you should discuss with a professional because it can have long-lasting impact on you and your credit score. It’s only appropriate in certain situations.
As soon as you realize that you cannot repay your loan, you should let your lender know as soon as possible. It’s not in their best interest for you to default on the loan and so where possible they’ll look to put in place a payment schedule.
Always remember that a payday loan is only ever supposed to be used as a short-term fix for unpredictable and unexpected payments. A payday loan should be used to bridge the gap between now and the next paycheck. This means you should be borrowing for a short period of time and for an amount that you can afford to repay.
