As the trend of getting Payday loans is becoming common, the trend of defaulting on such loans is also increasing. These loans have gained popularity in the state of Texas as well. However, of their very high APRs (often in hundreds of percentage) it becomes difficult for people to repay them. Thus, instead of being useful, they often end up causing more harm than good. This article will let you know what will happen if you can’t repay your payday loans.
What is a Payday Loan?
Payday loans are small personal loans which you take to fulfill your needs. As shown from their name, these loans are repaid on your very next payday after you take out the loan. To get the loan, you write a check to your lender of the amount you want to borrow along with the finance charges. These charges are not fixed and vary from lender to lender. At your next payday, they deposit the check to the bank in which you have an account and draw the money on the due date. You can also authorize the lenders to electronically draw money.
However, these loans are not always small and you can ask for bigger loans as well. You can also apply to repay them in installments. Otherwise, smaller loans are to be paid in one lump sum. Still, there are rare events that these loans actually become beneficial.
Will You Go to Jail if You Can’t Repay Your Payday Loans?
Though Payday loans are small loans that are to be paid until your next payday, yet most of the time, people default on them. This is because of their APRs which exceeds hundreds of percent. Also, often times, it is difficult for the people to repay them as soon as they receive their next paycheck. They end up getting rollovers which means you ask for the permission to repay on a later payday. However, the loan fees keeps on accumulating which means that your APR and interest rate will increase.
The loans you get from the banks are different in a way that the banks have information about your assets. And in case you default on your payment several times, they have the authority to seize those assets. However in payday loans, you don’t have to provide any information about your properties or assets. Thus, there is a misconception that if you fail to make payments, you can get arrested. However, this is not true. If you do not repay your payday loans, you won’t go to the jail.
What Will Happen if You Can’t Repay Your Payday Loans?
Failing to repay a loan is not a criminal offense rather debt collection is a matter of civil law. There are US protection laws for people who have financial problems and can’t repay their loans. Our US law is very clear about the matters of debt and one cannot be imprisoned for not being able to clear the debts. However, the creditors can file a case against you in civil courts for the collection of debts but not in criminal courts. The people can file for bankruptcy protection in case they default on loans.
Since you haven’t offered anything as mortgage, the collection of payday loans for lenders is a difficult task. They have a right to pursue debt collection through legal ways and can do that through civil courts. However, often times, things don’t go that far and they get money out of you by calling you day and night. Still, in case their check keeps getting bounced because of insufficient money in your account, they might threaten you with a lawsuit. They might claim to get you behind bars if you fail to make repayments but that is not true.
No creditor can put you in jail for the sole reason of defaulting on a payday loan. Only U.S attorneys or Prosecutors can do that if they believe that you have committed a crime. But that only happens quite rarely because they know not being able to clear debts is not a crime. In fact, most lenders know that Prosecutors don’t even take such cases because the interest rates are very high. Sometimes, the lenders might try to intimidate you with fake calls but do not let them scare you.
The other reason for the creditor to not go to the Prosecutor is that he knew that you would be unable to repay the loan in time with all of the interest rates. Because you would not have gotten the loan in the first place if you could repay it in such a short amount of time
Still, if you are worried that you may have to face charges due to defaults on your payday loans, then file for bankruptcy as soon as you miss a repayment. This will save you from all the collection efforts that the creditor might pursue. Moreover, it will remove most of your debt and will give you a fresh start.
Staff Write July 29th, 2018
Posted In: Payday