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Around 20%-25% of payday loan customers fail to repay their loan on the first round of collections and when taking on this kind of credit, it is important to know what the potential consequences are. These include:

  • Incurring late fees
  • Incurring added interest
  • Damage to your credit score
  • Difficulty securing a loan in future. 

One has to be aware of falling into a payday loans trap because if you cannot repay and start incurring added interest, late fees and start using loan extensions, the cost of your original loan can start to soar and you can find yourself falling into huge debt.

As soon as you realize that you cannot repay your loan, peaking to your lender as soon as possible to discuss your options and arrangements to pay should be the first thing you do.


Key Points: 

  • Failing to pay your debt repayments on time can incur late fees, harm your credit score, result in legal action, and calls from your lender. 
  • A weaker credit score can prevent you from acquiring a loan or mortgage in the future. 
  • Only around 75% of borrowers can afford to pay their loan back as agreed. 
  • Many lenders will offer you an ‘arrangement to pay’ if you are struggling to repay your debts. This is a restructured payment plan and can help you spread repay your repayments over time, but can impact your credit score


I Can’t Repay My Payday Loan. What Should I Do?

If you can see now that you won’t be able to meet repayments, your first step should be to communicate this to your lender. This is the most beneficial option – both for you, and for them. 

Many lenders, when approached by struggling borrowers, will offer them an arrangement to pay. This is a restructured repayment plan, which will be adjusted based on your current financial situation. They may offer to adjust the interest, or allow you to pay your debt back in smaller chunks over a longer period. 

If your lender is unbending and you need money fast, you could approach a loved one and ask them for support. Alternatively, you could ask for a cash advance at work. This is essentially an early paycheck. These are frequently offered at large employers. 


court for failing to pay debts

You could be threatened with legal action if you miss loan repayments


Think About Where Your Money Is Going 

If you thought you would be able to pay off your loan, but now you can’t find the funds to do so, where’s your money going? 

If you are living pay cheque to pay cheque, think about an alternative repayment plan. 

If, however, you are clothes shopping and splurging on takeout, then you need to budget! Paying off your debt should be at the top of your priority list and you should readjust your spending patterns. Consider downloading a budgeting app like Mint or Honeydue to track your spending and see where you could reduce your spending. This would make paying off your important debts easier. 


Can I Choose Not To Repay My Payday Loan?

Defaulting on payments has many negative ripple effects. 

Firstly, it’s expensive! Your lender has the right to impose late fees and to increase the interest on your loan. Given that the average APR on a payday loan is 400%, encouraging even higher interest is pricey. 

Secondly, if you don’t pay back your debt, your credit score will absorb some of the damage. It will be lowered by defaulting on payments, and that shows creditors that you are unreliable at repaying debts. This could minimize your chances of securing a mortgage, loan, or even a phone contract in the future. 



Why Would My Lender Help Me if I Cannot Repay My Loan?

Remember, it’s their money! It is in their interest to adjust your repayment plan if it makes it more likely for them to receive their money back simply. 

not all lenders will be willing to readjust your contract, but many will. The first thing to do is to speak to them.


Could I Go To Court If I Don’t Repay My Payday Loan?

While it is rare, yes, you could end up in court for not paying your debts. Prior to this, you usually would have been contacted by your lender, and their legal counsel. Going to court is a last resort. 

If you are summoned to court, it is important that you attend your hearing. Failing to turn up could mean that the lender automatically wins the case, simply because you are not there. It is always in your best interest to show up to a court date. 


create a budget

Track your spending and make adjustments to prepare for your payment deadlines


Could I Go To Prison For Not Repaying Off My Payday Loan?

No, you will not go to prison, but you could incur substantial financial costs if you end up in court. While you won’t go to jail for not paying your payday loan, you might find it more difficult to get future approval for loans. 

For the best outcome, be honest with your lender about your situation. Keep in mind that they want the dispute sorted, and would probably avoid the cost of getting legal counsel involved if they can.