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When you take out a loan, you are entering a legally binding contract with a lender. Within this contract, both parties are granted rights and it is important to understand what yours are. 


The rights you have include:

  • Having a clear contract including the terms of your loan (repayments, interest, loan amount)
  • Being able to cancel your loan upon request
  • Being able to stop payments if necessary
  • Requesting help if you are struggling to repay
  • Receiving alerts before each payment is due
  • The correct amount is taken from your account on the scheduled payment today
  • Court action may be applicable if your debt is long overdue
  • You will not go to prison over missed repayment
  • The lender will not repossess your home for missing payment


Can A Lender Sue Me For Not Repaying My Loan?

Yes, a lender could press legal action. This can only be done if you breach the terms of your contract, such as if you fail to meet your repayments. This is not unusual, as around 20% of borrowers cannot meet their initial repayment arrangement. Pressing legal action is rare and will be a last resort for a lender, but it may happen.

To avoid this, tell your lender if you are having trouble repaying them. In most cases, lenders will be happy to create an ‘arrangement to pay’ which is, in simple terms, a new contract with new repayment terms.   


your rights with a lender

You could be faced with legal action if you fail to repay your loan, but this is rare.


Can A Lender Seize My Home?

No, a payday lacks the right to seize your home. Direct payday loans are unsecured loans, which means that no collateral has been declared as a security to attain your loan. This means that your assets are not part of your contract, like they are in a mortgage or title loan. 

However, you need to be sure about liens. Some lenders will place a lien on your home, which is a legal claim on it. When you attempt to sell your home, you have to pay off your debt to remove this lien and move forward with the sale. 


Does My Lender Have Access To My Money?

Your agreement will usually dictate that your lender can automatically withdraw when you fail to pay them. This prevents them from going through the legal process.

If you have paid your debt, but have noticed withdrawals, contact your bank immediately. You are likely being scammed. Similarly, if you think they are withdrawing too often or too much, contact your bank. 

Your lender may pursue wage garnishment, which means that part of your paycheck is withheld and transferred to the lender before you receive it. 



Do All Lenders Offer The Same Terms?

No, your rights will waver between lenders. Firstly, independent lenders offer terms and conditions in line with state and federal laws. For instance, some lenders may not allow you to take out more than one loan with them at once. Some lenders may be willing to rearrange your repayments if you are struggling, while some will be more rigid. 

Your rights also vary depending upon state regulations, which means that your rights will differ from state to state. Some states, such as Washington and Virginia,  limit how many loans you can have at once, therefore removing your right to another loan. 

Other states, like those looking for payday loans in California, limit how much cash you can get your hands on. California, just to name one, sets a cap at $300 loans. Because of that, your lender cannot offer you more than that. 

Other states limit interest applied to loans, 18 states such as Montana and those looking for loans in Illinois have set that cap at 36%.



California houses the highest number of lenders of any US state, and imposes a limit of $300 on payday loans.


Can I Request An Adjusted Repayment Plan?

Yes, you can always ask. You may not always be given a yes, but many lenders are willing and happy to help. An Arrangement To Pay is when a lender and borrower create a restructured repayment plan, usually because the borrower is struggling to repay their loan.

With 25% of borrowers rolling over debts, this is common and the least stressful and damaging way to approach the situation. Failing to acknowledge that you are struggling will land you in greater trouble, and maybe even in court. 

An Arrangement To Pay will leave a mark on your credit history, but this is a preferable alternative than having defaulted payments on your credit record. 


What Can I Ask My Lender?

You may ask your lender any questions you may have, or ask for help regarding your loan. The answer won’t always be yes, but here are some frequent questions and requests borrowers ask their lender:

  • Why has my loan been declined?
  • Can I stop ACH automatic payments
  • I need an Arrangement to Pay. Can I have one?
  • Can I have a no-credit-check loan?

If you are not satisfied with the advice or answers provided by your lender, you may wish to speak to a financial advisor.