What Is Likely to Happen When You Default On Your Payday Loan
- Comments Off on What Is Likely to Happen When You Default On Your Payday Loan
Many people erroneously believe that because they borrowed a ‘small’ amount of money, then there is not much that the lender can do if the borrower defaults the payment. The truth is lenders of all sizes are willing to go to any length to get their money back regardless of the figure. You can expect constant calls, bank fees and multiple hits on your credit score.
It is important that you have a proper repayment plan when you apply for fast loans. If you are thinking about defaulting on your payment for whatever reason, below are a few things you can expect to happen in chronological order.
Multiple Calls and Bank Withdrawals
The moment you are late on your payments without prior notice, you can expect to start receiving calls from the collection agency. You can also expect letters from lawyers and frequent requests from your lender. If this communication doesn’t yield any progress, you can expect automatic bank withdrawals.
Remember you shared your bank details with the lender so now he is at liberty to request withdrawals. If you don’t have enough money in your account to cover the loan, the lender may reduce the charge to multiple small amounts to attempt to recover as much of the debt as possible. Remember that each time a failed withdrawal hits your account you incur a bank fee. Lenders aren’t allowed to threaten you while attempting to collect the loan.
No Jail Time
Although the lender isn’t allowed to threaten you, many make threats of jail or imprisonment. You cannot go to prison for failing to repay a loan. You can still expect the situation to escalate from this point on.
Attempting to Negotiate a Settlement
The last thing a lender wants is you to default on the payment entirely or have to hire a debt collection agency. The lender may try to negotiate a settlement whether that means extending the loan period or lower payments.
If this doesn’t work, the lender hires a collection agency. The debt collectors are far more aggressive and typically difficult to deal with. If the collection agency fails to recover the money, they may choose to file a court case.
Finally, when all else has failed, you are likely to find yourself in court. Again, no amount is too small as there are many cases for failure to pay under $500. Although you might not be imprisoned, you could be facing wage garnishment, bank account levies and property liens.
The best advice is to honor your payments on time. Call the lender immediately you realize you will not be able to honor your commitment to negotiate easier terms for yourself. Comin clean with the lender and negotiating a better repayment schedule can save you a lot of unnecessary problems.