What Happens If You Don't Pay a Payday Loan

By the time you wonder what happens if you don't pay a payday loan, you're probably already in trouble. As responsible and organized as we try to be, there are times when we fall a little short of time – and money. Payday loans are a popular –and effective – way to get cash in a pinch. Also known as short term loans, payday loans are just that – loans to help you get by until your next payday, when it’s expected you’ll have the money to pay back the lender. And like with any type of loan, there are repercussions if it is not paid back on time.

There are several things that can happen if you don't pay a payday loan. The first and most important thing is that you accumulate more interest on the loan and the balance will increase, even with just one missed payment. Prior to using any loan, it’s wise to fully understand the terms, which can motivate you even more to pay back the loan on time.

If you miss a payment, the interest grows and the amount of the payday loan jumps. A payday loan taken out and paid back the following week is easier to manage when you have a thorough understanding of your finances and what state your funds will be in the immediate future. The longer you wait to payback a payday loan the more you will owe due to extra interest and late payment penalties.

It’s common for a payday loan lender to try to reach you if you’ve missed a payment. Expect to be contacted immediately after the first missed payment, as it’s a problem for you and the lender if you delay paying the owed amount. Based on the terms of the agreement, your lender may be able to debit funds from your account or cash post-dated checks that you had written.

A variety of reasons could be the cause of not paying back a payday loan on time. The best solution to this potential problem is simply planning ahead and maintaining a close watch on your finances to ensure you can payback the payday loan in full when it’s due.

Finally, what happens if you don't pay a payday loan after several months or more than a year is that the lender could eventually file a lawsuit and take you to court for the amount owed.