What Happens If You Can’t Repay Your Payday Loan?
When it comes to payday loans and short term loans, repayments are often the most stressful element. Although the payments tend to be spread out in smaller instalments, for some people, they can often seem challenging. From paying in full to paying on time, there are numerous aspects you must consider when borrowing a loan. People typically borrow payday loans when they’re unable to find other quick sources of funding or financial help during emergencies. However, unfortunately, they’re usually not the best route to take, especially if you’re struggling with any kind of financial management, as you could end up in more severe debt. While different lenders have different policies on late or unpaid repayments, the majority are very similar. Here are just a few examples of what could happen if you can’t repay your payday loan:
Chasing The Debt
If you are inconsistent with your repayments and often pay them after the agreed date, creditors may grow less understanding. However, if you are usually consistent and your previous repayments have not been late, chasing the debt is the most common result. Typically, the lender or broker will contact you to reach an amicable agreement, often over the phone or in writing, which will enable both parties to understand what is happening.
Decreasing Credit Score
Your credit score is an important aspect of your daily life. From your mobile phone contracts to mortgages, your score can sometimes be a make-or-break decision. Individuals often put a lot of effort into increasing their credit score to keep it as high as possible. Therefore, for something to cause a noticeable decrease, it can often be quite distressing. In fact, late repayments and negative implications can stay on your credit report for around 7 years, meaning that you could potentially be held back from any kind of financial offer in the future. However, if this does occur, it is possible to rebuild your credit score.
Debt collection often occurs at the final stage, following multiple forms of failed contact through calls and letters demanding payment. Depending on the severity of the situation, if the lender cannot contact the individual, debt collection might be the only option available. The lender has the option of sending your details to a collection agency or hiring a lawyer to pursue the collection of the loan. Either way, you will be made aware of this before it occurs.
Depending on the duration of the inconsistency and failed payments, you might be able to stop collection efforts by requesting extensions. However, be aware that these extensions frequently include extra charges and interest rates.