We’ve all been there, feeling the pinch between paychecks and desperately searching for a quick fix. Payday loans, which offer direct deposits in minutes, often appear as a financial superhero during emergencies such as medical bills or car repairs.
But what happens if you can’t pay back that loan on time? Can you go to jail for not paying a payday loan? Let’s see if you could trade your cozy couch for a jail cell. It’s time to separate fact from fiction and see how much trouble you can get into when payday loans go wrong.
The Consumer Financial Protection Bureau (CFPB) regulates and informs consumers about lending. This institution says that, according to civil laws, the police can’t arrest borrowers for defaulting on payday loans.
It’s essential to mention that payday loan laws vary from place to place. Some states or countries have stricter regulations than others. In a few rare cases, there have been reports of borrowers facing criminal charges for bouncing checks used to repay payday loans. Let’s not get all worked up about those extreme situations. Most of the time, it’s the civil court path that lenders take.
Don’t panic! There is always a solution to manage your debt. First, assess all your financial possibilities, especially your monthly income. Next, follow these tips to help you manage this situation:
One thing they might do is try to withdraw the funds directly from the borrower’s bank account. They usually get account information when a consumer first applies for payday loans, and they can use it to their advantage. If the borrower is broke, they’ll keep trying to withdraw the loan amount you owe. It can lead to overdraft fees or a negative balance if the consumer doesn’t fund the account.
Another thing is that those payday lenders might start bombarding you with phone calls. They could reach your family members and friends to find you quickly.
Also, payday loan lenders will most likely pursue you through the civil court system to collect what’s owed to them. If the payday lender wins a case against you through court proceedings and gets a judgment, it can use that judgment to run wage garnishment or seize your assets.
A payday lender doesn’t check borrowers’ credit scores when lending money. They’re more interested in your ability to repay them within a short time frame. It sounds convenient, but let’s see how a payday loan debt can affect your credit.
If you fail to pay back that payday loan debt on time (or at all), things can take a turn for the worse. Remember, these payday lenders may not report your timely payments to credit bureaus, but they will indeed report your delinquencies. Those black marks on your credit report can haunt you like a bad dream long after.
When you miss payments or default on a payday loan, it’s like a giant red flag waving in front of lenders, telling them you’re a riskier applicant. They might see you as someone who can’t handle their financial obligations. Your credit score decreases, which can be a severe issue when you’re trying to borrow money or get approved for other types of loans.
If you can’t repay your payday loan and debt collectors are searching for you, here are some tips on how to handle them:
A debt collector has rules they must follow! Read the Fair Debt Collection Practices Act (FDCPA) to get informed about all the lending practices. It contains all the rules and restrictions these companies must follow. Don’t be afraid to remind them of your rights if they do something wrong.
Debt collectors can’t just claim you owe them money without any evidence. Ask them to provide written proof of the debt. They should be able to send you a detailed statement or documentation that proves you owe the money. Don’t back down until you see the receipts!
You can request a payment plan that will fit your monthly budget. If the debt collector sees that you’re ready for debt consolidation, they offer flexible loan payment terms plus interest rates.
There are many statute limitations regarding a payday loan company. Research and see how long a debt collector can pursue you and your consumer debt. If there is something they don’t follow, it’s time to remind them.
If you haven’t been keeping up with your financial obligations, you have a default on your monthly payment. It’s not a good practice, but the police won’t come to your door to arrest you. However, if you get a court-mandated order and don’t show up on the court day, you could go to jail for contempt of court.
It’s also possible that delinquent borrowers confuse civil and criminal matters. Defaulting on a payday loan or credit card debt is a civil matter, which means resolved through a court judgment rather than in a criminal court. As you know, criminal cases involve breaking the law and can result in arrests and jail time.
Depending on the state, the legal system has different processes to handle disputes regarding payday or traditional loans. They might file a lawsuit through court summons or hire debt collectors to recover their money.
The legal proceedings of lenders vary depending on the state and its lending laws. Here is the list of states where you can’t go to jail for not paying the payday loan debt:
New Mexico Wyoming North Dakota West Virginia South Dakota Alabama
However, in other 26 states, you could be arrested if you don’t show up in court. These include:
California Rhode Island Maryland Wisconsin Nebraska Ohio Arizona Tennessee Georgia Pennsylvania Illinois Texas Massachusetts Idaho
Michigan Oregon Louisiana Kansas Arkansas Indiana Utah Washington Minnesota Missouri Colorado Florida Wyoming
Don’t fear court summons in civil matters related to not repaying a payday loan. The court judgment won’t result in jail time, but your credit report may suffer if you have unpaid debts.
If you don’t want to deal with debt collectors, all you have to do is to avoid missed payments and unpaid taxes. Sometimes debt consolidation loans and speaking with a state’s attorney general are the only solution to deal with your payday loan lender.
Lenders require a post-dated check or an electronic withdrawal, so they don’t have to wait for you to come to pay your $400 payday loan. Some additional fees may be applied if you don’t have enough funds on the due date.
No! In most payday loan debt cases, you won’t go to jail for not paying the online loans. However, the lenders can sue you through court summons and repossess all you have because of unpaid debt.
A legit loan provider must have a license number or other licensing proof they show to borrowers. Don’t hesitate to ask. They will be willing to prove it if they are legit.