What Happens if You Don't Pay a Payday Loan in California?

Defaulting on a payday loan can have serious consequences, such as bank overdraft charges, collection calls, damage to your credit score, a day in court, and the garnishment of your paycheck. 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. These fast loans come with exorbitant interest rates and fees that often make it very difficult to repay them. If you cannot pay back a quick loan, it may be sent to a collection agency, which will damage your credit.

Debt collectors may attempt to intimidate borrowers by claiming that the borrower committed fraud, which constitutes a criminal offense. However, applying for a quick loan and then not being able to repay it is not fraud. A common tactic for dealing with payday lenders who repeatedly withdraw funds from a borrower's account is for the borrower to close the account and reopen another one at the same bank. If the payday loan company sells the account to a collection agent, the debtor can stop the phone calls by sending a letter requesting the cessation of communication, commonly called a cessation and withdrawal notice, to the collection agent. It is important to confirm with the state regulator or attorney general if a payday lender is licensed to do business in your state. California law limits the interest, fees, number of renewals, and other penalties payday lenders can charge.

Even if you can get a loan in the future, you could face much higher interest rates (though not as high as payday loan rates).With these loans' high rates and short loan terms, it's no wonder that borrowers transfer them over and over again so that the cumulative fees amount to an effective annualized interest rate of 390% to 780%. If the lender does not accept your payments, set aside what you can afford each month until you have enough money to repay the loan or offer a settlement. Over time, your loan may be given to a debt collector who will contact you to ask you to repay your loan in full. To avoid defaulting on your loan or running the risk of falling behind on payments, you can apply for another loan. This includes the charges and interest set to accrue between the time you apply for the loan and when it matures. So what happens if you're among the 80% of borrowers who can't repay their payday loans? Will you face jail time? The answer is no.

However, there are other consequences that come with not paying back these loans. To avoid these consequences, consider using a personal loan to pay off your high-interest payday loan and then repay it on a schedule that best suits you.

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