Obtaining a payday loan involves many risks, perhaps even too much. First, there is the interest rate which reaches an average annual interest rate of almost 400%. Then there are the short repayment terms, which means that you usually only have two weeks to repay the loan in full. Finally, there are lump sum repayment terms that can be difficult to pay.
But there are even risks that go beyond. For example, do you know what happens when you can’t pay your payday loan? One of the options could be to extend the loan. This means that you pay only the interest owed, then extend the term of the loan in exchange for a new tranche of interest.
But if you don’t pay the loan in full, the situation will get worse. You could even end up in court with wages seized. By the way, the answer to the previous title is “yes”. If you don’t pay a payday loan, your creditors can garnish your salary. The only thing is … it may not be the payday lender who does it.
What Happens If You Don’t Pay Payday Loan?
In general, one of the worst lines in the history of modern cinema is described: “The same thing happens if you do not pay another type of loan.” If you default on a personal loan, you have breached the end of the loan agreement. As soon as a default occurs, your creditor practically waives payment of the amount initially agreed and then tries to recover the loan as much as possible.
Aside from the fact that most lenders have a different approach. Instead of trying to collect their debts, they choose to end the game entirely. In such situations, they sell your account to a debt collection agency for a fraction of your debt and pay it off as a loss. This creditor is now the creditor to whom you owe money, and they are the ones who are trying to get you to pay.
However, one aspect of this is slightly different for payday loans than for ordinary loans. Most payday lenders do not share their payment information with the credit bureaus. This means that a one-time payment you make for this loan will not help your score.
In contrast, debt collection agencies report to the offices, which means that default on your loan and debt relief will result in a black mark on your credit report. This is why taking a payday loan may not help your score, but it can hurt you. It has very little to do with entering wages, but it is a reminder that payday loans are almost never worth it.
What can you do to avoid the wage embargo?
There are three things you can do to avoid going to court and getting money on your paycheck.
Bargaining: It can be tempting to completely ignore calls from a collection agency. Do not do that! Instead, use this opportunity to negotiate with them and agree on a lower amount. Many collection agencies do not expect them to be fully reimbursed. Take advantage and offer them the lowest fruit on the smallest (but guaranteed) payday.
Imagine: Do you know what happens when a sports team does not appear for the match? You lose. And many debt collection agencies expect the exact same thing if they take them to court. If you don’t appear, they win by default. So show yourself! This means that they must in fact represent their case and may not be as willing to do as you think.
