What Happens If You Can’t Repay a Payday Loan?
It can be scary when you realize you are not able to pay back any type of loan especially a payday loan. A payday loan does work a little differently to other loans though because they are short term loans that require no credit check.
Here is what happens if you can’t repay a payday loan.
What Happens If You Can’t Repay a Payday Loan?
They Will Take an Electronic Draft
Most payday loan lenders will now obtain their repayment by automatically drafting or taking the money from the borrower’s bank account. This is the bank account that the borrower listed when then took the payday loan. If this draft fails or if there are not enough funds in the account, the payday loan lender will try a few more times. If they are still not able to get their money than they are able to draw from any of the other South African accounts that have been listed by the borrower.
They Will Start Calling
If the payday loan lender is not able to collect the repayment from you, they will begin to place collection calls to the numbers listed by the borrower. There are some lenders that will make several calls a day in the attempt to annoy the borrow into repaying.
They Will Report You
If after 30 days, the payday loan lender has still not received their payment, the lender will report the failure to pay to the South African credit bureaus. This will reflect negatively on your credit report and borrowers will find it difficult in the future to obtain other loans and credit. This failure to pay will stay on your credit report for 7 years.
They May Enlist a Collection Agency
If a payday loan lender is still not able to get their money, then they may hire the services of a collection agency. These collection agencies will usually use the same tactics as before like direct mail and frequent phone calls. Also, if the lender writes off the loan by sending it to the collection agency this is reported to the credit bureaus and this will damage your credit score even more.
They May Take Legal Action
If the amount that you owe is very high, then the lender may sue in order to recover payment. If the court action is successful, then the borrower’s wages might be garnished until both court and loan costs have been repaid.
Wait…You can do something…
What to Do If You Can’t Pay Back Your Loan
If you are struggling to pay your payday loan, then you shouldn’t ignore the problem as this will not make it go away. If you are having problems, then there are some steps you can take, which will help to alleviate the stress and get you on the right track.
Contact Your Payday Lender
If you find that you are not able to pay your payday loan, then you must contact your lender as soon as possible. The lender needs to treat you fairly and give you reasonable time to repay the loan. They may freeze interest, suspend charges, stop recovery until a repayment plan is in place or accept smaller repayments.
All correspondence with the lender should be kept and recorded so that you are able to show you tried to make contact if they do not reply.
Consider Cancelling Recurring Payments
If you are not able to pay the loan or if paying the loan means you are not able to pay for essentials then you could consider contacting your bank and cancel the recurring payment, which allows the payday loan lender to take money from your account.
If you do this make sure that you have informed the lender of the action.
Keep a record of when you did this, because if they still able to take your money, you will need to lodge a complaint against your bank.
Do Not Roll Over Your Loan
The payday loan lender may suggest that you should roll over the loan for another month, but don’t do this. Rolling over the loan will mean you pay more for interest and other charges and you will end up owing more.
Rather seek debt advice and agree on a repayment plan.
Seek Help from A Free Debt Adviser
If you are struggling to pay your bills and are finding it hard to deal with the payday loan lender, then you should seek the help and advice of a free debt advisor.
A debt adviser will help you and will help to get your debts under control. They are also able to negotiate with the payday loan lender for you. If you are working with a debt advisor, then you should inform your payday loan lender immediately. The call you make to your payday loan lender should be followed by a letter to the lender.
Your lender will then have to give you a reasonable amount of time to sort out a repayment plan before they use a debt collection agency. If the payday loan lender, continues to contact you whilst you are still working with a debt advisor you should contact them asking them to stop.
A payday loan lender should not put you under any pressure. They are not able to call you at work without your permission. They are not allowed to discuss your debt with family or your employer and they are not allowed to refuse to work with a debt advisor that you have hired.
You might be wondering…
How to Complain About a Payday Loan Lender
If you think that your payday loan lender has treated you unfairly or if you are not happy with the repayment plan that they have put forward to you, then you are able to complain. You should first complain to them.
Once you have a lodged a complaint with the payday loan lender, they have about eight weeks to resolve the issue. If they do not or if you feel that they have not addressed your complaint correctly, then you are able to complain to a financial ombudsman service.
The financial ombudsman is an independent service that deals with complaints about financial services and providers. If the judge finds that the payday loan lender has not resolved your complaint correctly and properly or finds that they have treated, you unfairly then they are able to order them to pay you compensation.
Payday loans can be a useful financial product especially in times of emergency, but you need to be sure you are able to repay the loan when it is due. If you are not able to repay your payday loan, then seek the help of a debt advisor as they will work with you to help you in your financial situation.