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How Long Does a Payday Loan Stay in the System?

How Long Does a Payday Loan Stay in the System?

When borrowing money from financial institutions, an average American worker: “how long does a payday loan stay in the system if I default on it?” It stays with you forever, if the lender reports to the major credit bureaus. But if it only stays on there for several years, then what’s the big deal? Well, maybe there isn’t one. Is that true? Let’s find out together!

Table of Contents


  1. Unpaid Payday Loans Stay on Your Credit Report for 6 Years
  2. What Happens If You Default on Your Payday Loans?
  3. What is a Payday Loan Debt Trap?
  4. Can Payday Loan Debt Be Forgiven?
  5. Can You Get a New Payday Loan If You Default on a Previous One?
  6. What If You Close Your Bank Account and Ignore Your Payday Lender?
  7. How to Rebuild Credit After Defaulting on a Payday Loan?
  8. What are Payday Loan Alternatives?
  9. Bottom Line

Unpaid Payday Loans Stay on Your Credit Report for 6 Years

Did you know that unpaid payday loans remain on your credit report for up to six years? That’s right! Your credit report keeps this information for almost a decade and it can affect your creditworthiness.

Payday lenders report the payday loan information to credit reporting agencies (CRAs). The CRAs then add these accounts to your credit report, which payday loan lenders use when evaluating whether or not to grant you additional loans.

What Happens If You Default on Your Payday Loans?

All you know about defaulting a payday loan is there will be some negative consequences. But what are they? You won’t be arrested for not paying back your payday loan on time, but here’s what you can expect to happen:

The credit score will considerably decrease. The lender will apply an additional charge. Direct lenders may pass your payday loan agreement and details to a collection agency.

What is a Payday Loan Debt Trap?

A payday cash loan debt trap is a situation in which the borrower gets stuck in a seemingly unbreakable cycle of borrowing and paying back. The high costs will make you request rollovers, or new loans. It will lead you to a cycle of debt. As a result, you’ll pay more on payday loan interest rates. It means you never pay off the principal amount or reduce your debt over time. The only way out of this cycle is to stop borrowing money. We know it’s challenging because you never know when you’ll need extra dollars.

Can Payday Loan Debt Be Forgiven?

No! If you do not pay your payday lender back when it is due, you will likely be charged penalties and fees for late payments. These fees can add up quickly and make it even harder to get out from under your debt burden.

Can You Get a New Payday Loan If You Default on a Previous One?

It’s unlikely you will be able to get a new payday loan if you defaulted on a previous one. Although direct lenders don’t report your new loan to the major credit bureaus, lenders will share your default within the network of payday lenders. Read more about how many payday loans you can have.

Once the lender knows that you defaulted on a previous loan, they won’t allow you to borrow money. Your creditworthiness becomes risky and they’ll think you won’t be able to repay the loans on time.

Get a payday loan for your emergencies

What If You Close Your Bank Account and Ignore Your Payday Lender?

The Consumer Financial Protection Bureau has been issuing many rules to financial institutions to protect borrowers from predatory payday lending practices. It includes ensuring that payday lenders don’t try to collect money from borrowers who have already paid off their loans or closed their accounts.

But what if you avoid going to speak with your loan provider and disappear? It depends on whether or not your loan contract has a clause saying that if you closed your account without paying off the loan. Some financial institutions could still come after you for payment. If it doesn’t have such a clause, then they can avoid this practice.

How to Rebuild Credit After Defaulting on a Payday Loan?

It’s challenging to improve your credit situation but you must be patient and take concrete actions to rebuild your credit rating. Start with the following tips:

  1. Speak with your lender. Set a certain repayment schedule that will make you pay installments without damaging your monthly budget.
  2. Pay off all the small debts. Start making monthly payments of small loans, be it car payments or bad credit home improvement loans.
  3. Pay your utility bills on time. The electricity bills are also shown on your credit report. Make sure to pay it on time to avoid credit issues.
  4. Decrease your credit utilization ratio. Simply put, don’t apply for loans too often to avoid paying a lot of interest and checking your credit score through major credit bureaus.
  5. Monitor your credit score. You can check your credit without relying on hard credit pulls. Cosider free services that won’t affect your FICO score while verifying it.

What are Payday Loan Alternatives?


Do you want to avoid high interest rates of payday loans? Here are some alternatives to consider:

Cash Advance Apps

Cash advance apps are a quick way of borrowing money through your smartphone. Cash advance apps are great payday loan alternatives because they don’t make you undergo a hard credit check through major credit bureaus or employment verification. You’ll get your money deposited in the bank account within several steps and short time of approval.

Payday Alternative Loans (PALs)

Payday alternative loans (PALs) are a type of short-term loan designed for people who have trouble getting approved for a traditional loan. They’re usually cheaper than payday loans and have flexible repayment terms of up to six months. Such loans also offer a short-term solution for your financial problems.

Ask Friends and Family for Financial Help

Borrowing money from your family members is called a family loan. Such a loan may help you cover short-term financial needs like paying for a health emergency or car repairs that can’t wait until payday. Family loans may have interest rates or not; they also may be closed under a certain loan agreement where each part has rights and obligations. You may repay it in installments or a lump sum. Their major advantage is that you can request a more flexible repayment term to help you cover the loan in full and on time.

Credit Counseling

A credit counselor will help you assess your financial standing and make you understand how you can improve it within several months. Maybe you don’t know but there are two types of credit counseling: free and paid. Choose a non-profit organization for a free option, and pay one at private companies whose prices range from $45 up to $300, depending on your situation.

Bottom Line

Are you unsure about repaying your bad credit payday loan from a direct lender on time? Maybe it’s time to check your possibilities and see what you can do to avoid damaging your credit report. Also, remember that a payday loan can affect your credit if you don’t repay it on time. Consider speaking with a financial expert who will provide you with suitable tips and tricks.