Can Payday Loans Send You to Collections?

Payday loans have exorbitant interest rates and fees that often make it very difficult to repay them. If you can't pay back a quick loan, you may send the bill to a collection agency, which will damage your credit.

Payday loan

collectors don't waste time when the money owed to them expires. Since they can't access your bank account directly, they may decide to obtain a garnishment order.

This court order allows them to recover the debt by withdrawing money from the debtor's paycheck or bank account. No, you cannot be arrested for not paying a payday loan. However, if you are sued or if a court ruling was handed down against you and you ignore a court order to appear, a judge can issue an arrest warrant against you. There is a chance that the collection company will take you to court.

It can result in foreclosures against your property or wage garnishment. Even if a creditor hasn't sued you, if your income is exempt, you should be alert to avoid being garnished by a payday lender. You could end up taking out several loans in a year because you end up requesting one every payday to repay the last one or to pay other bills. A consolidation loan is another option if you need to pay off several high-interest loans or debts, such as credit cards.

However, some payday lenders have succeeded in using unfunded check laws to file criminal complaints against borrowers, and judges erroneously approve complaints. The lender will provide you with the loan funds in cash or by check, or deposit the funds directly into your checking account. Lenders cannot accept checks or authorizations to withdraw money from a military family's checking account as collateral for a loan. Along with your application, a payday lender will usually ask you for identification and evidence of your income, such as a driver's license and payment receipt.

If you believe that a payday lender harassed you when you were trying to collect your loan, contact the DFI to file a complaint. To make matters worse, if you can't pay on time, the loan comes with a late payment fee, an enormously high interest rate, not to mention countless calls from debt collectors. If the payday loan money is automatically deducted from your bank account, ask the bank to stop the automatic deduction. This means that failing to pay these loans can be extremely expensive.

We recommend that you do the math yourself if you have taken out a loan from a payday lender or are thinking about taking out a loan from them. Cash advance apps (also called paycheck advance apps), such as Chime, Earnin and MoneyLion, are another way for users to borrow a percentage of their expected earnings for a small fee and return it the next payday. Jokes aside, you'll want to negotiate with your lender, try to get a less expensive loan, or ask a friend or family member for a loan. Loans are also unique since repayment may require you to give up income that would otherwise be exempt from traditional collection efforts. If you think that these payday lenders are the lowest of all, wait until you start hearing from the mercenaries they hired to try and collect from you once they haven't received any money from you in about 60 days. It's illegal for a payday lender to threaten to put you in jail or prosecute you for an unpaid debt.