What happens if I default on a payday loan?

@kimberly 

If you default on a payday loan, it means that you fail to meet the agreed-upon repayment terms and are unable to repay the borrowed money. Here are the potential consequences:

1. Additional fees and interest: Most payday lenders charge high-interest rates and fees. In the case of default, they may continue adding interest charges and late fees to your outstanding balance, increasing your overall debt.
2. Collection efforts: Payday loan lenders usually employ aggressive collection practices to recover their money. This may include persistent phone calls, emails, and letters, as well as contacting your references or workplace. Some lenders may even hire debt collection agencies or take legal action against you.
3. Damage to credit score: Payday loan default can negatively impact your credit score. If the lender reports your default to credit bureaus, it will appear on your credit report and stay there for up to seven years, making it harder for you to get approved for future loans or credit cards.
4. Legal consequences: Depending on your jurisdiction, payday loan default can lead to legal action. The lender may file a lawsuit against you to recover the debt. If they win the case, the court could order wage garnishment, meaning a portion of your paycheck could be deducted to repay the loan.
5. Harassment and stress: Defaulting on a payday loan can result in harassment by the lender or debt collectors, causing significant emotional and psychological stress.

It is essential to understand the terms and potential consequences before taking out a payday loan. If you find yourself struggling to repay the loan, it's advisable to contact your lender to discuss repayment options or seek assistance from credit counseling services.