What Happens if You Don’t Pay Back a Payday Advance Loan?
If you’ve watched old western movies or mafia movies, you’ve probably seen the myths of old-fashioned loan sharks at work. A lot of people who need the money often feel afraid or intimidated of taking out cash, because they’re afraid of what might happen if they don’t pay back their loan.
To make a long story short, what happens if you don’t pay back your loan is that it goes on your credit report as a default. You might get a few debt collecting phone calls, but by and large there’s not much else that happens.
Here are some of the more common myths about what happens if you don’t pay back a payday loan and why they simply aren’t true.
Disclaimer: This is not legal advice.
Can You Be Sued for Failing to Repay a Payday Advance Loan?
Yes, your lenders have legal grounds to sue you for the money that you borrowed. However, because payday advance loans are for amounts so small, it almost never makes sense for them to do so.
Let’s say you took out $1,500, the maximum amount most lenders will allow you to borrow. To file a lawsuit, they need to pay a lawyer $150 an hour. Just filing the lawsuit and getting you to court would cost that much.
In short, it’s simply not worth it to them to sue you. It can happen, but it almost never does.
Can I Be Arrested for Not Repaying My Loan?
No. You can’t be arrested for not repaying your payday advance loan, because that’s a breach of a civil contract, not a criminal activity.
There are two exceptions to this however.
First, if you lied on your application, you could theoretically be arrested. However, this is also extremely rare. That said, lying on your application is generally not a good idea.
The second exception is bad checks. In person lenders will often have you write a check postdated to a future date for the full amount you owe them. That way, when it’s time to collect, all they need to do is cash your check.
However, if you don’t have the money in your account, you’ve essentially written a “bad check.” While it’s possible to get arrested for writing bad checks, usually you have to be doing it on a large scale with hostile intent. Writing one bad check because you didn’t have the money will almost never get you arrested.
So What Actually Happens if You Default?
What actually happens is that the lender reports you to the credit agencies as a default. Your debt is then usually sold off to a collection agency, who will then proceed to call you almost every day to collect the debt.
Aside from that however, there is almost no repercussions to you physically or legally.