Payday Loan Harrassment: What Happens When You Default on Your Loan

Payday loans are short-term loans that must be paid in full on your next payday.  If the full amount of the loan cannot be repaid, the borrower must then pay interest and fees in able to keep the loan active.  But what happens when you are unable to pay your lenders anything due to financial hardship?  What can you expect from your payday lenders after you default on your loan?

If you received payday loans online, you will default once your lenders are unable to debit your checking account on your payday.  You can expect an e-mail from your payday lender almost immediately stating that they were unable to withdraw a payment from your account.  Within a day or two, you could also start receiving collection phone calls.  The consistency of phone calls depend on which company you borrowed your loan from.  Phone calls can range from one to five phone calls a day.  If you provided personal references when applying for a loan, your payday lender may also call them.  It is even common for payday lenders to contact you at work, even if you state that you cannot be contacted at your place of employment.  If your payday lender is not able to contact you after a couple of weeks, or months, they could sell your account to an outside collection agency.  A third party collection agency could pursue the debt more aggressively than the original payday lender.  They could keep calling for weeks, even months, until the debt has been paid off.

Storefront payday lenders approach defaulted loans differently.  Since they are licensed in the state to conduct business in payday lending, they would be able to file a case with a small claims court against the borrower.  To obtain a loan from a storefront lender, borrowers need to provide the company with a check of the amount of loan being borrowed plus interest.  Once you fail to pay off your loan, or renew it by paying interest, the payday lender will immediately cash your check.  If the check bounces, your payday lender will often try to contact you by phone first.  Your references and job may also be contacted.  If you cannot be reached, your payday lender can then sue you for nonpayment and check fraud.  The main and only goal of your lenders is to get their money back through garnishing your wages.  If they are successful, you will not only have to pay the full loan amount of the original loan, but you would also be liable in paying any court, legal, and attorney fees.

Upon realizing that you will not be able to pay off your loans, your best bet is to contact your payday lenders directly and set up a payment arrangement so that you can pay the debt off slowly.  You can also negotiate with your lenders to agree on a low settlement that you can afford.  However, you need to evaluate your negotiations skills first before dealing with a collection agent.  People who are in the collection business are trained to get the most money out of you and can be intimidating at times.  If you are unsure of your skills, seek help from a payday loan consolidation company.  These companies are trained to get clients low settlements on payday loans and are successful because they already have existing relationships with major payday lenders across the country.

It is very difficult to get out of the payday loan trap once you get stuck in it.  If you need money fast, it is advisable to completely avoid payday loans altogether.  Talk to friends and family and seek their help first.  Payday loans should be your last option for fast cash.  If you decide to use them, be responsible and pay them back as soon as possible.