What Happens If You Don’t Pay Back a Payday Loan?

Payday loans are sort of a blurry issue for most state legislatures – technically not illegal in most states, but looked down upon everywhere. So, the question can be raised – if you decide to simply not pay back a payday loan, what happens?

First off, it varies widely state-to-state. In some states lenders have literally no ability to do anything but harass you and in some states they can file serious lawsuits and wreck your credit score.

However, just because there are laws governing the collections of payday loan debts, doesn’t mean that all lenders are going to play by the rules. In Texas for example, there are laws explicitly forbidding payday lenders from even threatening to file criminal charges with their customers (except in unusual circumstances). Nevertheless, a Texas Observer (newspaper) investigation found over 1,700 instances in which payday loan companies pursued criminal charges against customers in only San Antonio, Houston, and Amarillo. If that’s what’s going on in just a few cities in a single state, it’s hard to even imagine the tactics payday lenders all over the U.S. are using to force their customers to pay back their debts.

Remember – payday loans are a very cutthroat business – the phrase “friendly neighborhood payday lender” is not a phrase we are accustomed to hearing, as friendly neighborhood payday lenders simply do not exist, save for maybe a few scattered stores around the country.

It’s not like cash advance lenders have reputation to hold up to – most lenders have terrible reputations, as they’re constantly dealing with angry customers. It’s really just a fact of the business – it generally involves people in short-term dire situations and people who stay in dire situations for prolonged periods of time (the people who can’t pay back the loans). Whenever there’s financial trouble at hand, it always becomes a battle of blood, sweat, and tears, rather than a fruitful arrangement where everyone ends up happy.

In truth, there’s only so much a lender can do to attempt to get their money back. They’re likely to employ devious tactics, but in the end, they’ll probably just end up sending a collection agency after you.

Really, trying to skirt paying back a small loan is just a bad idea. They’ll ruin your credit score, threaten you, call you multiple times every single day for months on end, and all in all, just make your life a hassle. If you can find any way at all to pay back the loan, you’d be very wise to do so. Payday lenders are in a tough business and they never take kindly to customers who try to pull a fast one.

What Should You Do If You Can’t Pay Back a Payday Loan on Time?

You never want to be in a position where you can’t pay back a payday loan, but if you do get into that position, it’s important to know how to get out of it with the least amount of damage.

The first step should be contacting your payday lender. It’s possible that if you’re upfront with the lender about your problem they’ll let you off easy, possibly reducing the late fee or even giving you an extra few days to pay back the loan. They’re already making plenty off of the interest and want you as a repeat customer, so many lenders are happy to give you a break, as long as you’re transparent and honest.

If your lender won’t give you a break, even after you’ve contacted them, it’s time to think of other ideas. Now, late feesoverdue payment on online payday loans are ridiculously expensive – so expensive that it almost makes sense to take out another loan at a different lender if you’re in danger of being late.

Wait a second…that’s actually a decent idea. If you can get a good interest rate, it’s actually a viable option. Now, I’m not saying you should do this, as in a way it’s just compounding the issue, but it’s definitely something to take a look at. If you think you’ll have the money soon, you may as well, right?

You do run the risk of running up a large amount of debt if you use that method, though. One more loan turns into two more loans and two more loans turns in three more loans – there can definitely be a domino effect. So, while this works pretty well for paying off loans and keeping a good record with payday lenders, you should be cautious when using this, as you’re just continuing the pattern.

There really isn’t all that much you can do, other than making sure to pay off the loan as soon as possible. We all make mistakes once in awhile – it’s just important to learn from those mistakes and make sure you don’t put yourself in the same position again.

3 Tips for Getting Better Payday Loan Interest Rates

payday loans interest ratesIf you’re looking to get a cash advance, it’s a smart idea to find a lender with fair fees. Interest  rates vary greatly between lenders, so if you care about saving your money, spend a few minutes comparing lenders to the find the cheapest interest rates.

Most lenders are actually pretty fair, believe it or not. There are a lot of regulations regarding online payday loans these days, so most lenders just choose to play by the rules. However, it’s still important to avoid the bad apples, as you can find yourself in a heap of trouble due to ridiculously expensive fees.

Tip #1: Always tell your lender accurate information.

Lying to a lender is never a good idea. Most lenders are fairly accommodating to people who don’t have the greatest credit histories, backgrounds, etc., but nobody likes a liar. One good way to pretty much guarantee you’ll never be able to get a payday advance is to lie to the lender on the application form – after all, if a lender can’t trust you to give them accurate information, why should they trust you to pay back the loan?

Tip #2: Compare several lenders.

If you have the time to spend, it’s definitely a good idea to fill out the application forms for a few different loan companies. This way, you can choose the company which offers the lowest interest rates and possibly save quite a lot of money over the more expensive lenders.

Tip #3: Come back later.

Loan companies often give different rates on different days. If you receive an unusually high interest rate quote, it may just be bad luck or the time of day. If you’re dead set on using a particular company, try submitting a new application the next day.

There are only so many things you can do to get better interest rates on payday loans, but it’s still a good idea to go through them when applying for a loan (if you have the time). And remember – the biggest factor in how much you have to pay back to the lender is when you pay them back. Repay your loans on time and you’ll consistently get fair interest rates every time you want to take out a loan.