When you are stuck in a financial situation that is not ideal and have incurred an unexpected cost such as medical bill then you may decide to borrow money online. However, it is important, no matter how much you borrow whether you need to borrow $1000 or $100, that you know you will be able to repay your loan on time and that payday loans and other forms of short term loan are only utilized when you face a genuine financial emergency.
Not paying your payday loan back on time according to the repayment schedule you will have agreed with the lender can cause consequences for you in the long-term. Although payday loans are always unsecured loans and therefore a lender cannot take an asset of yours including a property, there are still consequences that could happen due to you not repaying your loan.
Therefore, it is vital, before you decide to even apply for a payday loan then you know you will have the money and means to repay the loan at your next payday. Even if you have bad credit, as long as you pay off your loan on time there will be no bad consequences.
This guide takes you through what happens if you do not repay your loan and whether or not a payday lender can take your home if you do not repay.
What Happens If I Do Not Repay My Payday Loan?
If you do not repay your payday loan on time then there a few things that your lender will begin to do. Firstly, they will begin to send you emails and letters to remind you that you need to repay. Lenders will then begin to charge you extra interest and late repayment fees, this could mean that you will end up paying a lot more money then you bargained for.
In extreme situations, payday lenders may take you to court if you continue to refuse to repay your loan and your credit score will be severely harmed by not repaying your payday loan on time.
What Should I Do If I Cannot Repay My Payday Loan?
There are a few things that you should do if you realize that you cannot repay your payday loan on time. The first thing that you must do is contact your lender and tell them about your situation as soon as possible.
When you speak to your lender you might be able to find an arrangement that works for both parties. The lender might realize they need to give you a little extra time to repay the loan or you can find alternative ways to repay. Payday lenders in the US will not want for you to fail to repay your loan and so, they are likely to be very willing to help you get back on track with a payment plan for the loan.
Finding a solution that helps both you and the lender financially can only happen if you contact your lender as soon as you realise you cannot repay. The longer you wait the worse it can become for you.
There is a chance that you find yourselves in trouble with money and there are people relying on you; if you are in this situation there are places such as legal aid centres, bankruptcy attorneys and credit counsellors who can help you find a way to get out of financial trouble with paying.
Claiming bankruptcy could be an option but this should always be discussed with a professional attorney.
Can A Payday Lender Take My Home If I Do Not Repay a Payday Loan?
No, a payday lender will not be able to take your home if you are unable to repay your payday loan, whether you have taken out a $600 loan, a $2000 loan or another loan amount..
There are definitely consequences, as listed above, that you are likely to face should you fail to repay your payday loan or short term loan on time, but the payday lender will not be able to take your home just like that. This is because payday loans are unsecured loans, this means that your loan is not secured against any of your assets.
If you fail to repay your mortgage, then it is possible that your lender could repossess your property because your mortgage is secured against your own property, with the property acting as collateral for the loan; a form of security which guarantees that repayment of the loan, or the seizure of the asset. This is also the case when it comes to title loans, which are secured against a vehicle.
Payday loans are different as they are nearly always unsecured and short-term loans. This means that a payday lender is not able to take your home if you do not repay payday loans. However, it is still vital that you know you can repay your payday loan before applying as other consequences of not repaying can be very bad.
Will Missing Loan Repayments Damage My Credit Score?
Yes. If you do not meet the required repayment terms for your payday or other short term unsecured loan, this will have negative consequences when it comes to your credit score. Remember, your credit score is the record of how responsible you are with repaying what you owe with regards to finance, loans and other credit. Therefore, failure to repay what you owe on time signals to lenders and credit providers that you are a risky prospect who does not necessarily repay what you owe on time; something lenders will often try to avoid altogether, making it harder and harder to borrow money.