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If you are unable to repay your payday loan it is possible that the lender could take you to court in order to reclaim the unpaid money.

This is if you have failed to make any kind of repayments and your debt has been outstanding for numerous months or years and you have failed to respond to the lender. Going to court may be a step taken by the lender to initiate some kind of repayment, assuming all other measures have failed.


Key Points

  • It is possible for your payday lender to take you to court over unpaid payday loans
  • Payday loan cases can only ever go to civil court, not criminal court
  • This is often a last resort or all other kinds of communication have failed
  • Unpaid payday loans cannot result in a jail sentence


What Happens If I Am Unable To Repay My Payday Loan?

Before entering a payday loan agreement with a lender, you should always make sure that you can afford to repay the loan on the agreed date. If not, you risk many negative consequences.

In addition to paying back the loan in full (the principal amount), you will also need to pay back the accrued interest at the same time. For online payday loans, interest rates tend to be extremely high. Therefore, when assessing whether or not you can afford to take out this loan, you must also consider the amount of interest you will be required to pay back.

If you cannot repay your payday loan on the due date, there may be the possibility of a rollover, depending on the lender and the location of the payday loan; rollovers can extend the date of the repayment but will also incur additional fees and increased interest.

Borrowers who are unable to repay their payday loan risk negatively impacting their credit score meaning that future loan approval may be negatively affected.

At the end of your agreed loan term, the lender will seek payment, either from your bank account or by cashing in a blank check that the borrower writes at the beginning of the loan term. If the money is not there, this could mean zero funds in your bank account, collection calls and lawsuits.

Additionally, lenders can continue to seek any outstanding debt on your loan which could incur additional bank fees for you.

If you are worried about repaying your payday loan, you should always try and speak to your lender and try to settle any debts as soon as possible before they escalate too much.



Can I Be Taken To Court If I Cannot Repay My Payday Loan?

It is common for payday lenders to take clients to court if they are unable to repay their payday loan. Even though payday loans are typically small amounts, lenders are still often willing to take the case to court in an attempt to reclaim their money.

As a borrower, if you are threatened with court action, you should always take it seriously. Often, lenders win court cases regarding payday lenders simply because the borrowers fail to show up in court.

In addition to court action, your payday lender could set up wage garnishment. This means that a portion of your paycheck will be withheld and rather than receive it on payday, it will be sent directly to the payday lender as a means of repaying your loan.

The more time that you are unable to repay your loan, the more time you are accruing interest and the worse the situation will be. As much as possible, you should always try to repay your loan on the agreed due date to avoid interest fees escalating.


Can I Be Sued By A Payday Lender?

If you are receiving threats from a payday lender due to an unpaid loan, you should take these seriously as they can quickly lead to court action.

Payday lenders can take clients to court if they default on their loans or if they violate the terms of their loan agreement in some way.

However, it is worth noting that while lenders can take you to court, it is a civil court rather than a criminal court. This means that even if a lender threatens to sue you, they cannot do so.

Going to court is typically very expensive given the mountain of legal fees involved. The most probable scenario is that a lender would try to first negotiate with the borrower to set up an alternative repayment plan.

If a payday lender does decide to take the matter to court and you do not respond to the court summons, you give the lender an automatic win as the court will be forced to rule in their favor. This could mean a wage garnishment.



If you cannot repay your payday loan, your payday lender could take you to civil court.


Can I Go To Jail For Not Repaying A Payday Loan?

You cannot go to jail for not repaying a payday loan, even if you default the loan payments. According to national law in the United States, debtors cannot be jailed for failing to pay a debt. Debtors could, however, file for bankruptcy protection if they are unable to repay their debts.

Because debt collection is a civil law matter, the case can never be escalated to criminal court meaning that debts cannot be prosecuted in criminal court if they are unable to repay their payday debt.



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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