In short, yes, you can go to court if you fail to meet payday loan repayments. Whilst it is unlikely, it is possible if you fail to cooperate with the lender. To help avoid this, it is best practice to fully understand the terms of your loan before taking it out, and ensure you are confident that you can keep up with the agreed upon repayments.
- A payday lender can decide to take you to court if you fail to meet your agreed upon loan repayments.
- Before this, a lender will often attempt to obtain the money that you owe via a scheduled repayment system that is beneficial to both parties.
- If no solution can be reached, you are uncooperative, or you are unable to pay the money, payday lenders could take you to court as a last resort.
What Should I Do If I Don’t Have the Money to Repay My Payday Loan?
As soon as you realise that you may struggle to reach an agreed upon repayment, you should contact your payday lender online. A lender will usually want to avoid going to court, so will often try to reach an agreement with you that is beneficial to both you and the lender to make it possible for you to repay the money you owe. This could include setting a payment schedule that would be more affordable.
Undoubtedly, finding yourself in a position where you are unable to repay a loan can be incredibly stressful, as you may worry about how you will afford to financially support yourself and your family. In this case, it would be beneficial to seek advice and counsel from bankruptcy attorneys, legal aid centres, or nonprofit credit counsellors. If you decide you need to declare bankruptcy, this should always be discussed with a professional, as in some cases this is not appropriate.
What Will Happen if I Can’t Repay My Payday Loan?
There are several potential consequences if you default on your payday loan: a negative impact on your credit score, wage garnishment (where part of your wage is withheld and paid to the lender), involvement of debt collectors, filing of lawsuits, and time in prison. Receiving prison time for failure to repay a loan is incredibly unlikely, but it has happened.
After the agreed upon loan period ends, the payday lender can implement one of more actions to attempt to recover your unpaid funds. Payday lenders could set up automatic withdrawals from your bank account which can result in additional fees to the bank. They can also use wage garnishment, where a portion of your wage is withheld and paid directly to the payday lender. Debt collectors may be brought in to help seize assets, and, if all else fails, you may be summoned to court.
Can I Be Taken to Court if I Can’t Repay My Loan?
Payday lenders can take clients to court if they fail to repay their payday loan. An option is that payday lenders can sue customers who fail to repay their loan, in order to collect the money they are owed. A judgement or order will be entered against you by the court if you are summoned and do not dispute the payday lender’s claim, or if they win regardless.
It can’t be stressed enough how important it is to fully understand the terms of your payday loan, and to only ever borrow what you know you can afford to repay. You should always read the full terms of your loan, and check what is expected of you as a borrower prior to taking out a payday loan.
What Happens If I Am Summoned to Court for Failure to Repay a Payday Loan?
Lenders will typically attempt to create an alternative arrangement before taking a legal route. They may set a more affordable repayment schedule that suits both parties. However, if a payday lender cannot find a suitable arrangement, or you fail to be cooperative, they can take you to court. Lenders have been known to take clients to court over relatively small loans, so do not think that a small loan will prevent you from being taken to court by a payday lender.
If you are summoned to court, the most important thing to do is make sure that you show up! You should always take lawsuits seriously and turn up to court on that date(s) you have been asked to. In many cases, payday lenders have automatically won cases as a result of their client not attending the court session.
Charlotte is an expert writer with over 10 years of experience in the financial space. Follow her posts for useful advice and interesting facts on key topics such as money, finance and payday loans.