What Happens When You Stop Paying Payday Loans
Stopped Paying Payday Loans? Whats Next?
What Happens When You Stop Paying Payday Loans – One mistake financially a borrower can commit is defaulting on payday loan payments. There are consequences involved when such a time arises. One of the repercussions that come with defaulting on your payday loans is draining your bank account. Eventually, debt collection services might get involved in the process of recovering the debt owed to the lender. It’s always advisable and sound financial management practice to settle your debt on time or understand your lender relating to a repayment time extension.
Consequently, defaulting a payday loan has severe consequences for your bank overdraft fees, collection fees, and most importantly, your credit score gets severely damaged. When the above measures do not bear fruits, it’s not a surprise that you can find yourself in a courtroom answering to some charges. There are times when you can’t fully settle the payday loan, and you should pay the loan partially or, in extreme cases, apply for bankruptcy when the debt levels become overwhelming. But in an ideal situation, defaulting on a payday loan comes with the following expectations. These are some of the consequences of what happens when you stop paying your payday loans.
Collection Calls & Bank Withdrawals
Payday lenders do not hesitate to come knocking at your doorstep when it comes to collecting their dues. Payday lenders withdraw their money directly from your bank account, provided you authorized them to have access to such an account during loan application. Most of the lending institutions have this as part of their agreement to sign against Payday Loan Consolidation. The payday loan lenders are a bit mischievous when it comes to debt recovery. They sometimes get forced to break down the money into small chunks to extract money from your account.
Any failed attempt to recover money from your account have a serious consequence on your bank charges as it attracts bank fee against your account. Your bank account will get drained with no time until they fully recover their dues with any successful attempts. A depleted account will result in other transactions failing or bouncing that get penalized with bank fees.
Recovering Payday Loan Debt Settlement from your bank account doesn’t mean other recovery measures get put at a halt. With recovery attempts from your bank, the lenders will engage the defaulter in many other ways, such as cold calling, sending threatening letters from their lawyers. When the above measures don’t bear fruits, the lenders will go a notch higher by contacting your relatives and friends used as reference when acquiring this loan. Based on the federal regulation, the payday loan lenders cannot disclose to your contacted friends and relatives the reasons for calling. They can only ask for their goodwill and willingness to help them locate the loan defaulter where bout.
Threats About Jail But No Jail Time
Any failure to service your loan on time gets not treated as a criminal offense, and you cannot serve a jail term for this. Regulations bind lenders from threatening borrowers with threats such as arrests or jail terms when recovering their debt. In some rare instances, some payday loan lenders can navigate through the justice system and use the bad check law to prosecute a borrower in courts and complain to judges who at times agree with the lender’s complaints.
Every State is Different
The state has an authorized body, the National Payday Loan Relief, whose sole mandate centered around the protection and championing of consumer rights. NPDLR advises borrowers who receive threatening messages over issues such as nonpayment from their lenders to immediately make contact with their state attorney general and file a complaint against the lender. In a situation where the lender files an erroneous criminal case for defaulting your loan, National Payday Loan Relief advises the borrower to attend the court summons faithfully.
Negotiate Your Repayment Terms
Another outcome on What happens when you stop paying your payday loans; Lenders are pretty open to negotiations when it comes to loan repayments than being forced to sell your debt to other collection agencies. When your ender engages a third-party debt collection agency, they offset your loan by just a fraction of its value. Such a situation is not an ideal one as it means they lose money. Therefore, if you can open room for negotiation and come up with a repayment plan, that would be the best option for both of you, the defaulter and the lender. The lender will accept a certain percentage getting paid ant an agreed period until the debt gets fully settled.
Lenders fear the word bankruptcy, and they will not entertain the borrower to think of filling for one as it means they will end up with nothing. In such a situation, they prefer agreeing on the official debt payment. It’s essential to ensure that the new agreement you enter with your lender is in writing and stipulates the balance you owe them, and they plan to reduce it to zero.
Payday Loan Relief Program
Similarly, defaulters can apply for a Payday Loan Relief Program when they get stuck in repaying their loans. A payday loan relief program allows a defaulter to reorganize their finances with an extension of repayment time. In a situation you also fail to honor the agreement stated above, the lender can now involve external debt collectors to recover their debt from you.
Summons From Courts
Sometimes loan defaulters tend to think that lenders and debt collection agencies cannot sue the defaulter for a small amount of money. That is a misconception, and one needs to realize that debt collectors will go all the way to recover every penny a defaulter owes the lender. Surprisingly, a considerable number of lawsuits against consumers are small amount cases. Such court summons above is part of what happens when you stop paying your payday loans. Most lenders come out as winners in such lawsuits get pegged on the fact that most consumers do not honor court summons when called upon. At this point, the judge has no option but to enter into a default judgment, where the court starts collecting the debt on behalf of the lender.
The court has various alternatives and options to collect the dues depending on the state you are living in. Some of the prominent and standard measures taken include property liens, wage garnishment, and bank account levies. That’s why no matter What happens when you stop paying your payday loans, never ignore a court summons. Whenever you appear before a judge, always ask the lender to show proof of you owing them a debt, and you will be surprised that they show up in court without any.