About 10 million Americans take out payday loans on an annual basis. As inflation continues to rise and wages continue to get outpaced, that number could trend upwards notwithstanding potential regulatory changes, as the FDIC continues to review the rules for payday loans..
For most people that are interested in taking on a payday loan, the act of approaching a lender and borrowing against next month’s paycheck is easy enough.
Requirements for payday loans no credit check tend to be simple. Lenders are usually more than willing to accommodate a wide variety of borrowers.
What’s hard about taking on payday loans is paying your loan back.
Have you ever wondered what would happen if you didn’t?
Below, we walk you through what it means to default on a loan and some potential payday loan default repercussions.
What Does It Mean to Default on a Loan?
There may be confusion around what exactly a payday loan default entails. To clear that confusion and set up the rest of our article, quickly, defaulting on a guaranteed loan means not paying it back.
To clarify, some people occasionally miss an installment loan payment. This wouldn’t be considered defaulting on your loan if you quickly caught up with your obligations.
Borrowers that fall so far behind on their loan obligations that they give up on meeting their side of the agreed-upon lending deal are considered to be in default.
What Happens If You Default on Your Payday Loan?
There is no single answer as to what will happen if you default on your bad credit loan because many of the repercussions that you could face vary from lender to lender.
Generally speaking, these are the problems that you could run into as a result of a payday loan default:
1. Your Credit Will Get Damaged
One of the lowest hanging fruits when it comes to consequences for defaulting on your loan is damaged credit. Your credit is what tells the world how likely you are to uphold your end of agreements with lenders, renters, and other parties.
If your lender reports your not paying them to the credit bureaus, your credit score could drop significantly.
2. Fees Will Get Added To Your Balance
Before your personal loan no credit check is officially recognized as being in default, most payday loan lenders will have run up your balance significantly.
Their ability to do this is spelled out in your initial borrowing agreement. Many lenders have contingencies that allow them to levy fees against you for things like late payments.
With each missed payment, your balance will go up and what’s worst is that you’ll need to pay interest on that heightened balance (which will also keep accruing interest during the months that you’re not paying).
3. Your Lender Won’t Lend to You Anymore
This is an obvious payday loan default repercussion but one that many people tend not to pay mind until the inconvenience of it hits them. If you’ve proven to a particular lender that you’re hard to lend to, they won’t do business with you anymore.
You might be thinking that you’ll go to a different lender for a personal loan but for many people, the business that they typically borrow from represents a convenient option that’s close to where they live and offers good terms.
If you like the lender that you work with, do your best to not burn bridges with them by communicating when you’re having trouble coming up with the money.
4. Your Debt Could Get Sold
You might not be worried about dealing with your local lender and their requests for you to pay them back. Maybe the person that runs the no credit check loan company you borrow from is too nice to put up much of a fuss.
What many people with this mindset find out though is that payday loan lenders have no problem selling your debt to collection agencies. These agencies buy debt at discounted rates and then ruthlessly hunt their money down.
Debt collection agencies might harass you at work, at home and may even tell friends and family members about what you owe.
To avoid that, always do your best to settle your debt with your lender directly so they don’t feel pressured to sell. Since collection agencies tend to buy debt at 25% or lower than what they’re worth, your original lender could be willing to cut you a deal that benefits you both.
5. Going to Court Could Be Necessary
Depending on the amount of money that you’ve borrowed, small claims court is a possibility.
It’s important to note that most payday loan companies will not take clients to court. Going to court is just too time-consuming and costly to justify the trouble since most loan amounts given via payday loans are relatively small.
Just because the court isn’t common though doesn’t mean that you won’t run into a lender that chooses to subject you to standing in front of a judge.
Our Final Thoughts on Payday Loan Default
Thousands of people experience payday loan default every year. In some cases, defaulting is a by-product of borrowers being irresponsible. In other cases, borrowers may have borrowed money from a bad lender that convoluted the borrowing process to the point that defaulting was inevitable.
If you’d like to take out a payday loan from a good lender that spells out their terms, it’s important that you shop around to figure out what the best lending options are out there.
Our team at Bonsai Finance can help with that.
We provide people like you with free loan search tools that allow you to see every payday loan being offered online with the click of a button.
Our readers love our tools because it saves them time and saves them money.
If you’d like to find a great lender to borrow from today, check out our free loan finding tool by clicking here! Here are some other articles you might enjoy from our blog:
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